CONSUMER CATALOGERS: Cutting losses by cutting circ

Aug 01, 1999 9:30 PM  By

Of the 20 publicly traded catalogers and cataloger/retailers tracked by Catalog Age, 75% improved their first-quarter sales over last year’s, while 50% improved their bottom line.

Several catalogers, aware that bigger isn’t always better, cut their losses by cutting circulation – even to the point of sacrificing sales. Longmont, CO-based Concepts Direct, whose titles include the Linda Anderson gifts catalog and the Snoopy Etc. novelties catalog, slashed circulation 32%. Still, sales fell only 19%, to $12.5 million for the quarter. And Concepts Direct narrowed its loss 29%, from $624,000 for the first quarter of ’98 to $445,000.

Likewise, motivational products and golf gifts cataloger Successories benefited from reducing the circulation of its Golf Co. from Golf Digest and British Links catalogs, and its European mailings of the core Successories book. First-quarter revenue dipped less than 2%, from $12.3 million to $12.1 million – but the company’s first-quarter loss fell 60%, from $1.4 million to $557,000.

“Our selling, general, and administrative expenses were reduced more than 15% compared to last year’s quarter due to reducing the scope of investment in our golf catalog business and exiting our European expansion,” says Successories president Gary Rovansek. But the Aurora, IL-based company plans to boost the circulation of its flagship catalog more than 12% later this year.

For its part, Weehawken, NJ-based multititle catalog company Hanover Direct reduced the flow of red ink 8%, resulting in a first-quarter loss of $4.4 million, primarily by mailing 5 million fewer catalogs. And the circulation decrease didn’t even hurt sales; in fact, revenue rose nearly 3%, to $127.7 million.

But while reducing circulation – and subsequently, printing and mailing costs – can give a boost to the bottom line, the move isn’t without risks. “You can reduce your house file reactivations and prospect mailings to such an extent that the size of the house file declines,” says Nick Holland, of Boston-based investment bank Ulin & Holland.

Sagging fortunes

Rye, NY-based gifts cataloger Lillian Vernon was one of the five consumer catalogers whose bottom line sagged during the quarter. First-quarter net income plunged 94%, to $194,000 from $3.0 million. But the company noted that its fiscal first quarter of last year was 14 weeks long, which also contributed to the apparent 13% drop in net sales, from $87 million to $75.7 million. What’s more, this year the company incurred a one-time severence cost of $765,000 following the departure of three senior level executives.

Apparel and home goods Blair Corp. blamed disappointing response, increased postage costs, and the need to reduce merchandise to move excess inventory for its 58% tumble in profit, to $2.3 million. Increased circulation helped grow the Warren, PA-based cataloger’s sales more than 5%, however, to $122.0 million.

New York-based Delia’s almost ended up in the red as well. Lower fill rates, markdowns, and advertising costs for its Screem! retail chain would have produced a first-quarter net loss of nearly $2.5 million for the marketer of teen apparel and soccer gear. But Delia’s netted more than $70 million in April, following the initial public offering of its iTurf Internet subsidiary. The result: a whopping 1,142% increase in net income, from $2.0 million to $24.8 million. As its Generation Y customer base might say, “Diesel move, dudes.”