A flourishing fourth quarter

May 01, 2006 9:30 PM  By

The end of 2005 provided a profitable landscape for the large majority of publicly traded consumer merchants tracked for Multichannel Merchant. by Wellesley, MA-based investment bank Tully & Holland. Sales rose for all but one of the 11 companies tracked, while all of the marketers reported an improved bottom line.

“Christmas was good for multichannel marketers,” says Stuart Rose, managing director of Tully & Holland. “Fourth-quarter sales and earnings were strong. Only Blair Corp. saw a sales decline, and that was due to a divestiture. In fact, its earnings were up.”

One of the companies usually included in the quarterly update, Sharper Image Corp., hadn’t reported its fourth-quarter results as of press time. But it had announced estimated fourth-quarter sales of $254 million, down 13% from 2004, and earnings were expected to be down as well. “Sharper Image has serious issues,” says Rose, “and its CEO and founder is under pressure from major shareholders.”

RedEnvelope disappointed with growth

Quarter ended: Jan. 1 The facts: San Francisco-based gifts marketer RedEnvelope reported sales of $53.0 million for the quarter, a 12% jump from $47.5 million for the fourth quarter of 2004. Net income soared 48%, to $4.1 million. Nonetheless, the company was somewhat disappointed with the results. “We are pleased that our net revenue grew more than 11%, but we were expecting more robust growth,” president/CEO Alison May said in a release. “Our home, new baby and children’s, gourmet foods, and plants and flowers categories performed best this season, and we currently plan to build on that strength. And though jewelry sales increased, May said that they, along with sales of men’s and women’s accessories, fell short of expectations, “and we currently plan to increase our focus on building an assortment in these categories.” The skinny: May admitted that “our catalog was a less efficient marketing channel than during the third quarter of fiscal 2005. We are currently reevaluating our catalog circulation strategy with the goal of getting a better return on this major component of our marketing expenses.”

Sales way up at Gaiam

Quarter ended: Dec. 31 The facts: The Broomfield, CO-based Gaiam, a manufacturer/marketer of “healthy living” products, generated fourth-quarter revenue of $64.3 million, a whopping 85% increase from the same period of 2004. The strong fourth-quarter performance was due in part to sales of media titles acquired from New York-based video/DVD company Good Times Entertainment in September 2005. But internal sales growth for the quarter was a robust 16%, with year-over-year sales in the business segment up 14%. Direct-to-consumer sales, which include the Living Arts, Real Goods, and Harmony catalogs, rose 17%. Total fourth-quarter revenue for Gaiam’s direct-to-consumer segment, including growth from acquisitions, increased 65%, to $30.8 million. The skinny: During the fourth quarter, Gaiam generated $5.5 million cash from its operations and increased its cash position from $10.2 million at the end of September to $15.0 million. The company has no debt and an unused $15 million line of credit.

Divestiture, one-time gain colors Blair results

Quarter ended: Dec. 31 The facts: Fourth-quarter net sales for the Warren, PA-based apparel and home goods cataloger were $130.1 million, 2% less that the $133.4 million reported in the same period last year. The reduction in net sales is attributed to the elimination of the Crossing Pointe women’s apparel catalog and Website in March 2005. On the other side of the ledger, net income soared 269%, to $23.4 million from $6.3 million a year earlier, the result of a one-time gain of $27.7 million from the sale of Blair’s credit portfolio. Without the one-time gain, net income for the fourth quarter would have slipped slightly, to $6.2 million. The skinny: “Despite lower-than-anticipated response rates to Blair’s traditional mailings and the divestiture of Crossing Pointe, sales only moderated slightly,” says Rose. What’s more, e-commerce sales rose despite the discontinued Crossing Pointe business.

12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
(000) (000)
1-800-Flowers.com $230,014 $277,829 21% $8,704 $10,336 19%
Alloy 41,842 43,211 3% (73,347) (23,785) NM
Blair Corp. 133,411 130,126 (2%) 6,346 23,416 269%
Coldwater Creek 204,130 287,883 41% 11,401 18,873 66%
Gaiam 34,828 64,322 85% (564) 1,481 NM
J.C. Penney Co. 5,955,000 6,203,000 4% 333,000 551,000 65%
J. Jill Group 119,444 130,957 10% 2,600 3,040 17%
RedEnvelope 47,514 53,029 12% 2,768 4,102 48%
The Sportsman’s Guide 91,062 95,215 5% 3,668 4,500 23%
Talbots 470,725 486,168 3% 15,379 19,777 29%
Williams-Sonoma 1,083,639 1,214,397 12% 113,748 120,783 6%
Notes: NM = not meaningful Source: Tully & Holland