Consumer Catalogers: Getting Ready for a Turnaround

First-quarter results from publicly traded consumer catalogers suggest that the economy may have hit bottom and is poised for a turnaround.

Among the 15 consumer catalogers and cataloger/retailers tracked for Catalog Age by investment bank Tulley & Holland, four, or 27%, suffered a decline in first-quarter revenue. And six of the companies, or 40%, saw their net income decline or their net loss grow.

Why is that encouraging? Because in the previous first quarter, sales dropped for nearly the same percentage of catalogers (28%) — and the bottom line had deteriorated for 72% of the catalogers tracked.

But Jim Adams, managing director of Wellesley, MA-based Tulley & Holland, warns against breaking out the bubbly just yet. “It’s not likely” that we’re already in recovery mode, he says, “but at least the news is fairly positive. When a turnaround does occur, many of these companies will be well positioned to take advantage.”

CATALOG AGE SPOTLIGHT ON FIRST-QUARTER FINANCIALS

J. Jill’s top-notch bottom line

Quarter ended: March 30

Women’s apparel cataloger/retailer J. Jill Group enjoyed a 16% boost in first-quarter revenue — and a fantastic 239% leap in net income. The Quincy, MA-based marketer reported net income of $2.7 million on net sales of $73.4 million. For the first quarter of 2001, net income had been $796,000 on sales of $63.3 million. Catalog and Internet sales decreased 3%, to $51.2 million, mainly as a result of lower promotional activity. But retail sales more than doubled, mostly due to new store openings.

The skinny: J. Jill gets high marks for savvy inventory management. The company says it reduced inventory balances 28% for the quarter by ordering merchandise more conservatively and timing receipts closer to need.

More good news for Lands’ End

Quarter ended: May 3

Apparel and home goods cataloger Lands’ End more than doubled its first-quarter net income, to $16.5 million from $5.9 million last year. At the same time, revenue rose 10%, to $341.2 million from $311.1 million. Web sales jumped 46%, to $79 million from $54 million, while international sales rose nearly 13%, to $32 million from $28 million. But sales from the Dodgeville, WI-based company’s specialty books, which include its Kids and Home catalogs, slid 1%, to $85 million, as the Corporate Sales catalog felt the pinch of budget cutting among companies nationwide.

The skinny: In case you’ve been living under a rock, Lands’ End was acquired by Sears, Roebuck & Co. in June, for the equivalent of 27 times earnings.

Williams-Sonoma celebrates record first-quarter income

Quarter ended: May 5

San Francisco-based Williams-Sonoma credited “significant operational improvements,” along with a 15% rise in revenue, for its record first-quarter profit. For the three months ended May 5, the multititle cataloger/retailer posted net earnings of $15.4 million, a dramatic improvement from the $492,000 in income it recorded for the first quarter of fiscal 2001. Total net revenue for the quarter was $478.4 million, up from $417.6 million a year ago. First-quarter catalog and Internet sales rose a more modest 6%, to $178.3 million from $167.7 million, with the Pottery Barn and Pottery Barn Kids home decor brands driving the growth. (Williams-Sonoma’s other brands include the flagship kitchenware catalog and retail chain, storage products cataloger/retailer Hold Everything, and upscale bedding catalog Chambers.) Retail sales increased 20%, to $267.6 million, and comparable store sales rose 6%.

The skinny: Williams-Sonoma hopes to turn new catalog West Elm, which launched this spring, into a lower-priced Pottery Barn.

Lower sales, higher profits for Delia’s

Quarter ended: May 4

First-quarter net sales at teen girls apparel cataloger/retailer Delia’s decreased 21%, to $28.8 million from $36.2 million, due to catalog circulation cuts. But those cuts may also have contributed to the New York-based company’s bottom-line boost. The net loss before the cumulative effect of a change in accounting principle was $4.3 million, compared with its first-quarter loss of $8.3 million last year. And after the positive effect of a change in accounting principle, Delia’s actually reported a profit of $11.1 million.

The skinny: Delia’s shaved more than $5 million from its general and administrative costs, from $24.7 million in the first quarter of fiscal 2001 to $17.6 million.

Blair’s in the black

Quarter ended: March 31

Apparel and home goods cataloger Blair Corp. reported a 2% rise in first-quarter net sales, to $135.3 million from $133.1 million last year. Even better, the Warren, PA-based company turned around last year’s first-quarter net loss of $231,946 to post net income of $5.6 million. Last year’s results had included a one-time $2.5 million cost associated with a “voluntary separation program,” in which Blair moved an operations center that employed about 50 workers who chose to leave the firm rather than relocate.

The skinny: Operating costs for the first quarter, which include advertising and general, administrative and interest expenses, decreased 10%.

FINANCIAL REPORT
REVENUE $000 NET INCOME $000
12 months prior Current quarter Improvement (decline) 12 months prior Current quarter Improvement (decline) Info as of quarter ended P/E (as of 6/18/02)
CONSUMER CATALOGERS Blair Corp. 133,055 135,261 2% (232) 5,601 NM 3/31/02 12.08
Coldwater Creek 138,992 116,601 (16%) 772 (2,451) NM 3/2/02 114.65
Concepts Direct 12,092 13,933 15% (1,166) (2,087) NM 3/31/02 N/A
Delia’s 36,231 28,770 (21%) (8,299) 11,114 NM 5/4/02 N/A
Geerlings & Wade 7,153 7,364 3% (174) (741) NM 3/31/02 N/A
Hanover Direct 144,294 109,511 (24%) (7,642) (1,810) NM 3/30/02 N/A
J. Jill Group 63,332 73,357 16% 796 2,696 239% 3/30/02 29.39
Lands’ End 311,120 341,175 10% 5,858 16,496 182% 5/3/02 24.12
Lillian Vernon Corp. 95,159 96,091 1% (2,877) (4,343) NM 2/23/02 N/A
CATALOGER/RETAILERS Brookstone 54,997 56,633 3% (5,193) (6,519) NM 5/4/02 35.55
J.C. Penney Co. 7,522,000 7,728,000 3% 41,000 86,000 110% 4/27/02 48.85
Jos. A. Bank 47,406 55,760 18% 506 1,731 242% 5/4/02 14.30
Sharper Image 69,759 92,836 33% (2,756) (260) NM 4/30/02 64.00
Talbots 401,072 391,328 (2%) 40,113 34,983 (13%) 5/4/02 19.97
Williams-Sonoma 417,572 478,379 15% 492 15,353 3,021% 5/5/02 77.51
MARKET INDICES Dow Jones Industrial Average 25.69
Standard & Poor’s 500 Index 40.8
Notes: Price-to-earnings ratios are from various sources
NM = not meaningful NA = not available
Source: Tulley & Holland

For the most up-to-date information about catalog financials — and other industry news — visit www.CatalogAgemag.com.

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