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.

CATALOG AGE’S SPOTLIGHT ON THIRD-QUARTER FINANCIALS

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.

FINANCIAL REPORT
REVENUE $000 NET INCOME (LOSS) $000
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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