Bottoms Make That Bottom Lines Up

On the surface, the third quarter of 2002 was a hale and hardy one for consumer catalogers. Of the 15 publicly traded catalogers and cataloger/retailers tracked by investment back Tully & Holland for Catalog Age, 73% had improved their bottom line. What’s more, 53% posted gains in net sales from the previous third quarter.

But bear in mind just how dismal the third quarter of 2001 had been: only 47% had increased their net income or reduced their net loss, and only 41% had increased revenue.

The cataloger/retailers saw most of the quarter’s growth, says Jim Adams, managing director at Wellesley, MA-based Tully & Holland. At those that rely primarily, if not exclusively, on catalog sales, “bottom-line improvements from Blair, Geerlings & Wade, Hanover Direct, and Successories have come as a result of circulation cutbacks, as each had sales declines,” he notes.


Stores lead sales growth at J. Jill

Quarter ended: Sept. 28

The numbers: Women’s apparel marketer J. Jill Group enjoyed a 22% increase in third-quarter sales and a 31% rise in net income for the three months ended Sept. 28. The company reported net income of $3.6 million on sales of $80.0 million. For the third quarter of fiscal 2001, J. Jill had netted $2.8 million on $65.8 million in revenue. Retail accounted for most of the growth: Catalog and Web sales increased a modest 5%, to $50.4 million from $47.8 million the previous year, due to higher circulation. Retail sales increased 64%, to $29.8 million from $18.2 million, primarily from new store openings.

The skinny: During the quarter, J. Jill incurred a $1 million one-time charge for costs related to a potential strategic acquisition that it abandoned. The company would not divulge details.

Circulation cuts trim Brookstone’s 3Q loss

Quarter ended: Nov. 2

The numbers: Nashua, NH-based cataloger/retailer Brookstone, which mails the Brookstone, Hard-to-Find Tools, and Gardeners Eden titles, posted a net loss of $6.7 million. But that’s actually good news: For the third quarter of 2001, Brookstone had lost $9.0 million. Total third-quarter sales increased 7%, to $62.8 million from $58.5 million last year. Catalog and Internet sales fell 7%, however, to $12.5 million. Same-store sales increased 7%.

The skinny: The 7% decline in direct sales looks good, given that Brookstone cut its catalog circulation 24%.

Blair shakes off the red ink

Quarter ended: Sept. 30

The numbers: Though net sales dropped 4%, Warren, PA-based Blair Corp. ended the third quarter in the black. Net income totaled $279,386, compared with a net loss of $3.3 million for the third quarter of 2001. Sales fell to $117.8 million from $123.0 million a year ago. The apparel and home goods cataloger attributes the improved bottom line to a significant reduction in the cost of goods sold, resulting in part from lower inventory liquidation costs.

The skinny: Blair lowered its advertising, general, and administrative costs and interest expenses 5% for the quarter.

Bottom-line surges at Penney

Quarter ended: Oct. 26

The numbers: Third-quarter catalog sales at general merchandiser J.C. Penney Co. were down 21% — but so what? The big news is that net income for the quarter shot up 297%, to $123 million from $31 million a year earlier. Total sales for the quarter rose 2%, to $7.87 billion. Combined revenue from the Penney catalog, Website, and department stores fell 1%, to $4.3 billion from $4.4 billion. (Penney also owns the Eckerd drugstore chain.) But comparable store sales rose 4%.

The skinny: Penney says its department stores and catalog gross margin increased by 130 basis points as a percent of sales. Improved gross margin is principally the result of the effects of centralization and catalog inventory management.

Tasty quarter for Williams-Sonoma

Quarter ended: Nov. 3

The numbers: Cataloger/retailer Williams-Sonoma, whose titles include Pottery Barn, Hold Everything, Chambers, and West Elm, has plenty to brag about. Its third-quarter net earnings jumped 293% while net revenue, including shipping fees, increased 14%. All told, Williams-Sonoma netted $15.1 million on revenue of $527.9 million. Catalog and Internet sales increased 7%, to $187.7 million from $176.2 million last year. The company attributes its strong show to growth in the Pottery Barn, Williams-Sonoma, and Pottery Barn Kids brands and incremental sales from the West Elm catalog, which launched in the first quarter of 2002.

The skinny: The impressive results come despite a decline in sales from its Hold Everything brand. The San Francisco-based company attributes the dip to introductory discounts given to customers who signed up for Hold Everything’s new private-label credit card.

Talbots catalog sales slip 9%

Quarter ended: Nov. 2

The numbers: Third-quarter sales at Hingham, MA-based apparel cataloger/retailer The Talbots increased just 2%, to $401.8 million from $394.0 million last year. Net income increased a scant 2% as well, to $37.4 million. Catalog sales decreased 9%, to $62.1 million from $68.2 million last year. Retail store sales increased 4%, to $339.7 million, but comparable store sales decreased 3%.

The skinny: A recent company study showed that “purchases by less frequent customers dropped off significantly” as part of the overall softer retail climate, says spokesperson Margery Myers.

12 months prior Current quarter Improvement (decline) 12 months prior Current quarter Improvement (decline) Info as of quarter ended P/E (as of 12/11/02)
CONSUMER CATALOGERS Blair Corp. $123,019 $117,830 (4%) ($3,314) $279 NM 9/30/02 9.39
Coldwater Creek 92,848 92,794 0 1,296 (650) NM 8/31/02 129.17
Concepts Direct 11,248 10,562 (6%) (856) (2,499) (192%) 9/30/02 N/A
Delia’s 32,503 32,904 1% (3,151) (10,687) (239%) 11/2/02 N/A
Geerlings & Wade 6,901 6,033 (13%) (293) 1 NM 9/30/02 N/A
Hanover Direct 117,431 106,030 (10%) (6,806) (4,212) 38% 9/28/02 N/A
J. Jill Group 65,808 80,012 22% 2,755 3,621 31% 9/28/02 14.16
Lillian Vernon Corp. 36,828 36,056 (2%) (3,428) (6,080) (77%) 8/24/02 N/A
Successories 8,058 7,163 (11%) (2,833) (2,280) 20% 8/3/02 N/A
CATALOGER/RETAILERS Brookstone 58,523 62,843 7% (8,987) (6,672) 26% 11/2/02 18.45
J.C. Penney Co. 7,729,000 7,872,000 2% 31,000 123,000 297% 10/26/02 26.25
Jos. A. Bank 50,243 57,866 15% 1,316 1,864 42% 11/2/02 16.90
Sharper Image Corp. 77,004 106,109 38% (3,815) (493) 87% 10/31/02 22.97
Talbots 393,966 401,789 2% 36,558 37,407 2% 11/2/02 13.94
Williams-Sonoma 462,096 527,894 14% 3,853 15,137 293% 11/3/02 27.81
MARKET INDICES Dow Jones Industrial Average 21.93
Standard & Poor’s 500 Index 29.32
Notes: Price-to-earnings ratios are from various sources
NM = not meaningful
NA = not available
Source: Tully & Holland

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