CONSUMER AND CATALOGER/RETAILER: Topsy-turvy third quarter

Previously profitable mailers see red; others return to the black

Call it a reversal of fortunes: During the third quarter of 1999, a number of the publicly traded consumer catalogers and cataloger/retailers that had been profitable a year earlier suffered losses. At the same time, several catalogers that had posted appreciable losses during the third quarter of 1998 managed to stem the flow of red ink in 1999.

“In the catalog sector, the predominant trend showed a number of catalogers that reported a drop in revenue or reported a small gain,” says Jim Adams, managing director of Boston-based investment bank Ulin and Holland. “But some catalogers showed improvement on the bottom line because of more-controlled circulation during the period.” In total, 63% of the consumer catalogers and the cataloger/retailers tracked by Catalog Age suffered a decline in income or reported a loss during the quarter, as did 65% of the catalogers during the third quarter of 1998.

Teen apparel marketer Delia’s was one of the catalogers that saw its 1998 third-quarter profit turn into a loss in ’99. The New York-based company lost $6 million during the quarter ended Oct. 30, compared to net income of $747,000 a year prior. Delia’s blamed increased sales and marketing expenses, as well as the cost of opening stores and expanding its Internet operations for the loss, which came despite an 18% boost in third-quarter sales.

Apparel marketer J. Jill Group ended the quarter in the red as well. And not only did the company post a loss of $4.2 million for the quarter (compared to net income of $1.4 million the previous third quarter), but it also saw revenue dip nearly 1%. The Hingham, MA-based mailer blamed lower-than-expected sales from its Nicole catalog, which the company folded during the quarter, and increased competition in the apparel sector for much of its poor showing.

On the upside, Downers Grove, IL-based general merchandiser Spiegel had the most dramatic turnaround. Net earnings were $4.1 million during the quarter, compared to a net loss of $4.2 million during last year’s third quarter. According to spokeswoman Debbie Koopman, the flagship Spiegel catalog and the Eddie Bauer division enjoyed gains in productivity. The Spiegel book also benefited from increased circulation, while Eddie Bauer’s circulation was cut.

More trading places

Cataloger/retailers were not exempt from the topsy-turviness of the quarter. For example, Hampstead, MD-based men’s clothier Jos. A. Bank, which reported net income of $2.2 million for the third quarter of ’98, lost $236,000 this time around due to a softness in suit sales. (See “Bank tries to get casualwear right,” January 2000 issue.)

Conversely, San Francisco-based gadgets marketer Sharper Image, which lost $1.4 million for the third quarter of ’98, enjoyed third-quarter net income of $148,000 in ’99, thanks to the introduction of additional proprietary products, which tend to carry higher margins. The proprietary products also helped swell sales 36%, to $58.3 million.

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