Spiegel to sell troubled unit; reports down quarter, year

The Spiegel Group

(NYSE:SPGLA,) which mails the Eddie Bauer, Newport News, and Spiegel catalogs, said it will sell its troubled credit card business, including its First Consumers National Bank subsidiary (FCNB), as part of a strategy to focus on its retail business and consistent earnings growth.

“We have made a strategic decision to remove the credit card operations from our business mix to intensify our focus on our core retail business and strengthen our financial position,” said Martin Zaepfel, vice chairman/president/CEO of The Spiegel Group, in a statement. “Offering credit to our customers will continue to be an important service. As part of this transaction, we will form a relationship with a third-party to provide private-label credit card programs to our customers.”

Downers Grove, IL-based Spiegel also said that earnings for the fourth quarter ended Dec. 29, from continuing operations fell 19%, to $18.1 million, compared with earnings from continuing operations (before the cumulative effect of an accounting change) totaled $22.4 million last year. In addition, Spiegel Group reported a total loss from discontinued operations of $396.3 million in the fourth quarter, compared to earnings from discontinued operations of $42.9 million, last year. The loss from discontinued operations in 2001 primarily consists of an estimated loss on the sale of the credit card business. Total revenue from continuing operations for the quarter declined 13%, to $1.012 billion, from $1.164 billion for the fourth quarter last year as lower customer response decreased net sales.

For the year ended Dec. 29, the company reported a loss from continuing operations of $17.8 million, compared with earnings from continuing operations (before the cumulative effect of an accounting change) of a gain $8.9 million for fiscal year. The company also reported a loss from discontinued operations for the year of $379.8 million, compared to earnings from discontinued operations of $116.0 million, last year. Revenue for the year from continuing operations decreased 8% to $3.079 billion from $3.346 billion for the comparable period last year. The revenue decline was driven by a 9% drop in net sales, which includes a 15% decline in comparable-store sales at Eddie Bauer.

As a result of its 2001 financial performance, including the estimated loss recorded in the fourth quarter for the disposition of its credit card business, the company is not in compliance with certain loan covenants. Spiegel is currently working with its bank group and its majority shareholder to restructure its credit facilities.

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