CONSUMER CATALOGS: Good and bad times

First-quarter sales and profits a mixed bag

The first quarter after the holidays is a sluggish time for many consumer catalogers. But this year, several mailers and cataloger/retailers, including Coldwater Creek, Spiegel, and The Sharper Image, saw sales and profit increases. On the other hand, apparel giant Lands’ End, wine and accessories marketer Geerlings & Wade, and women’s apparel marketer J. Jill Group suffered a dip in sales.

Struggling with falling response, excess inventory, and increased competition in recent years, $1.32 billion apparel cataloger Lands’ End posted decreases in both net sales and net income for the first quarter ended April 28. Net sales fell 8.1%, from $290 million last year to $266 million this quarter. Excluding the Willis & Geiger catalog business, which was discontinued last year, net sales fell 4.6% on 5% fewer catalog pages circulated. Net income for the Dodgeville, WI-based company reached only $292,000, compared to net income of $6.5 million in ’99.

Meanwhile, J. Jill saw sales drop 24%, to $49.4 million, compared to $64.7 million in the first quarter last year. (Net sales for the first quarter of fiscal 1999 had included the Nicole Summers catalog, which the company closed in September ’99.) Net income for the first quarter of 2000 was $750,000, down from $1.3 million a year ago. The company blames its fall ’99 expansion into Web and retail for its falling sales and profits.

Indeed, says Jim Adams, managing director at Boston-based investment bank Ulin & Holland, many catalogers are still paying for earlier Web or retail initiatives. For instance, New York-based teen apparel marketer Delia’s posted a 17.3% sales increase, to $49.1 million from $41.8 million for the first quarter of 1999, due largely to retail sales. But as for profits, Delia’s net loss was $8.7 million, more than triple the $2.5 million net loss (before nonrecurring items) incurred in ’99. This year’s red ink includes $5.3 million in losses at its Web subsidiary iTurf. Soaring expenses also hurt the bottom line: Costs from its retail expansion and departure from its Screeem! stores accounted for $39 million.

The first-quarter news wasn’t all bad, however. General merchandiser Spiegel and apparel cataloger Coldwater Creek each posted quarterly sales gains of 14% – and even greater profit growth. And while Lillian Vernon’s sales for the quarter decreased 6%, from $75.8 million to $71.5 million, profits for the gifts and home goods cataloger surged $354%, thanks to more targeted circulation.

And several catalog/retailers reported a banner first quarter. San Francisco-based gadgets marketer Sharper Image’s sales were $59.1 million, an increase of 45% over $40.9 million last year. Catalog sales of $12.2 million were 37% higher than last year’s $8.9 million. Led by a 51% increase in gross margin from its private-label products, Sharper Image boosted profits to $105,000, a considerable improvement from last year’s net loss of $1.7 million.

At Hingham, MA-based Talbots, a 26% rise in catalog sales, to $62.4 million, and a 21% increase in store sales, to $295.4 million, resulted in 22% overall sales growth at the women’s apparel marketer. The company credits strong sales of full-priced merchandise (as opposed to sale items). Net income in the first quarter was $32.7 million, up 69% from $19.4 million in ’99.

San Francisco-based multititle cataloger/retailer Williams-Sonoma reported an almost as impressive 48% boost in net earnings, to $4.8 million from $3.3 million in the same period of 1999. First-quarter net sales grew 32.6%, to $343 million from $258.7 million. Retail sales rose 23.7%, to $195.9 million. And last but not least, catalog sales were $147.1 million – a 46.6% jump over last year.

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