Second quarter shows promise

It was a promising quarter for the 10 publicly traded consumer merchants reporting financial figures for Multichannel Merchant. Revenue increased for all but one of the companies tracked, and only two failed to show improvements in their bottom lines.

“The industry had a strong quarter with almost all the companies profiled showing improvements in revenue,” says Stuart Rose, managing director of Wellesley, MA-based investment bank Tully & Holland. “The one exception was Sharper Image, whose struggles continued as sales declined even further despite favorable signs of consumer spending.”

Unlike sales, results were mixed for net income among direct-to-consumer companies. While some firms, such as Gaiam and Jos. A. Bank, reported significant improvements in earnings, others like Talbots and Williams Sonoma showed dismal numbers, he says. “Delia’s and Sharper Image both continued to show a decline in earnings while 1-800-Flowers.com had a turnaround quarter, moving past its negative earnings in the previous quarter to report positive returns this quarter.”

1-800-Flowers.com dials a winner

Quarter ended: April 1 The facts: The multititle merchant’s first-quarter sales rose 18.8%, to $213.8 million, compared with $180 million in the same quarter in 2006. Strong growth in the company’s key Consumer Floral, BloomNet Wire Service, and gourmet food and gift baskets categories keyed the rise in revenue. Net income soared 168.4%, to $2.6 million after a net loss of $1.5 million in the same quarter last year. Strong revenue growth was tempered by lower year-over-year sales in the company’s home and children’s gifts category, reflecting management’s decision to scale back marketing in this category. Indeed, Rose says, “the gourmet food and gift segment exploded this quarter with a 150% increase in revenue compared to the first quarter of 2006 on the strength of acquiring the Fannie May Confections Brands and Wind and Weather.” The skinny: Rose says the profitable first quarter “comes as an unexpected surprise,” considering that most of 1-800-Flower.com’s sales traditionally occur in the holiday quarter.

Coldwater Creek on the rise

Quarter ended: May 5 The facts: Women’s apparel cataloger/retailer Coldwater Creek posted a 4% increase in net income, to $12.0 million from $11.6 million for the first quarter of 2006. Net sales for the first quarter jumped nearly 31%, to $281.3 million from $215.3 million last year. Same-store sales increased 7%. Net sales from the retail segment increased 44%, to $184.9 million. Catalog/Internet net sales rose 11%, to $96.4 million from $86.7 million. Specifically, Internet sales increased 18.5%, to $65.8 million, but catalog sales slipped 2%, to $30.6 million. Coldwater’s direct segment saw a $9.7 million increase in net sales during the first quarter of 2007 compared to the quarter in 2006, mainly to an 18.5% increase in Internet net sales. The company had a 28% jump in gross profit, and gross margin percentages remained consistent year over year, an indication that it’s been able to increase sales “while keeping gross margin constant and not discounting,” Rose says. Its retail segment posted a $56.3 million growth in sales for the first quarter of fiscal 2007 when compared to the corresponding quarter of the previous year. The skinny: Sandpoint, ID-based Coldwater cites several reasons for its success, namely the addition of stores and day spas, a national branding campaign, increased catalog circulation, targeted e-mail campaigns, and revenue from a new cobranded credit card program.

Mixed bag for Talbots

Quarter ended: May 5 The facts: Total sales for the quarter were $573.6 million, compared with $453.0 million a year ago, a healthy 27% rise. But last year’s first-quarter figures did not include revenue from women’s apparel brand J. Jill, which Talbots acquired last spring for $517 million. Catalog and Web sales rose 55%, to $105.6 million, but last year’s numbers did not include J. Jill. Total same-store sales fell 3.5% from the first quarter of 2006. The Hingham, MA-based cataloger/retailer posted net income of $5.2 million, down 81% from $27.4 million one year ago. “Talbots’ troubles persisted as the company experienced a rocky quarter with a 27% increase in revenue combined with an 81% decrease in net income,” Rose says. “While the company showed a 3.9% decrease in same-store sales, the retailer experienced large gains in direct marketing sales. The skinny: The costly acquisition of J. Jill can only partially be held to blame for Talbot’s struggles, Rose says. The company’s core business is still down.

Company 2Q REVENUE 2Q NET INCOME (LOSS)
12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
(000) (000)
1-800-Flowers.com 180,017 213,779 19% (1,540) 1,053 NM
Coldwater Creek 215,261 281,292 31% 11,572 12,030 4%
Collegiate Pacific 59,418 63,235 6% 1,232 1,738 41%
Delia’s 51,870 57,807 11% (1,220) (3,265) NM
Gaiam 51,752 58,458 13% 890 1,752 97%
J.C. Penney Co. 4,220,000 4,350,000 3% 210,000 238,000 13%
Jos. A. Bank 113,665 129,533 14% 5,861 8,358 43%
Sharper Image 106,800 67,600 -37% (12,700) (16,800) NM
Talbots 453,012 573,556 27% 27,356 5,240 -81%
Williams-Sonoma 794,286 816,051 3% 23,099 18,150 -21%
Notes: NM = not meaningful Source: Tully & Holland

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