Financial Update: Consumer Catalogs Limp Past the Midyear Mark

Even before the catastrophic events of Sept. 11, consumer mailers were feeling the effects of diminishing consumer confidence and spending. Of the 17 publicly traded consumer catalogers and cataloger/retailers tracked by Boston-based investment firm Ulin & Holland for Catalog Age, 47% posted a net loss in the second quarter.

What’s more, the quarter’s bottom-line results for 53% of the companies were worse than they had been for those companies the previous year. And 41% of the marketers suffered a decline in sales. Only three of the companies — women’s apparel cataloger/retailers J. Jill Group and The Talbots, and apparel and home goods cataloger Lands’ End — managed to improve both revenue and net income.

Most marketers had a tough second quarter, says Jim Adams, managing director at Boston-based Ulin & Holland. “Consumers limited their catalog and retail purchases out of fear the economy was going to take a dive.” Unfortunately, acting on such fears turned them into a self-fulfilling prophecy.

CATALOG AGE’S SPOTLIGHT ON SECOND-QUARTER FINANCIALS

Lands’ End Back in the Black

The Dodgeville, WI-based apparel and home goods mailer posted net income of $3.0 million for the quarter ended July 27 — a vast improvement upon last year’s second-quarter net loss of $1.9 million. The cataloger attributes the gain to better-targeted mailings, which also helps to explain the 4% revenue increase, to $285.8 million from $275.6 million the previous year. Web sales climbed 32%, to $51 million from $39 million. Sales from Lands’ End’s core business increased 6%, to $160 million. But the specialty-business segment showed flat sales of $72 million; the gains in the children’s and home products businesses did not compensate for the decline in the Corporate Sales business.

The Skinny: Selling, general, and administrative (SGA) expenses were 42% of Lands’ End’s total revenue this second quarter, compared with 45% last year. Stronger customer response resulted in increased productivity per catalog page — and lower catalog costs.

Hanover Lightens Load

Shedding company assets can strengthen the bottom line — just ask Weehawken, NJ-based multititle cataloger Hanover Direct. For the quarter ended June 30, Hanover posted a net income of $12.7 million, compared with a net loss a year ago of $13.7 million. The income includes $22.8 million from the sale of the Improvements catalog business and an additional $1.5 million from the sale of a Hanover, PA, warehouse. Of course, the sale of Improvements — not to mention the closing of the Kitchen & Garden, Kitchen & Home, and Turiya catalogs in the fourth quarter of fiscal 2000 — took its toll on sales: Net revenue decreased 7%, to $133.5 million for the quarter.

The Skinny: The divestitures and closings weren’t the only reason for Hanover’s sales decline: Revenue from one of its core titles, the Domestications bedding catalog, fell 13% from the second quarter of 2000.

Building a Strong J. JIll Two Ways

Amid the general gloominess, J. Jill posted both top-line and bottom-line improvements. The Hingham, MA-based cataloger/retailer grew net income 27%, to $2.6 million from $2.0 million last year. During the same period, net sales increased 29%, to $66.2 million from $51.5 million. Sales from J. Jill’s catalogs and Website increased 5%, to $50.5 million, on flat circulation. Web sales totaled $13.1 million, or 26% of direct sales, double the $6.5 million in sales the Website generated the previous second quarter.

The Skinny: Bravo for the back end: J. Jill reduced the cost of handling a transaction 25% from last year. And the company’s initial fill rate rose from 86% last spring to 91%.

Catalog Cramps Jos. A. Bank’s Style

Net income for men’s apparel cataloger/retailer Jos. A. Bank Clothiers tumbled 52%, to $291,000 from $611,000 last year. What’s more, catalog sales decreased 18%, though Internet sales did increase 85%. Comparable store sales decreased 1% for the quarter. Total sales for the Hampstead, MD-based mailer increased 3%, to $46.1 million from $44.9 million a year earlier.

The Skinny: Bank blames its catalog business, in part, for dragging on corporate earnings. So it has tinkered with circulation and creative in the hopes of improving the catalog’s performance.

Earnings Down 73% at Williams-Sonoma

San Francisco-based home products marketer Williams-Sonoma, which mails the Chambers, Pottery Barn, Pottery Barn Kids, Hold Everything, and Williams-Sonoma catalogs, posted net income of $1.4 million for the quarter ended July 30. That’s a 73% drop from $5.1 million for the second quarter of 2000. Total net revenue grew 17%, to $429.0 million from $366.5 million. Direct sales (excluding shipping fees) increased 15%, to $158.3 million, fueled by the Pottery Barn and Pottery Barn Kids brands. Retail sales increased 18%, to $244.4 million.

The Skinny: Williams-Sonoma’s SGA expenses increased 18%, to $142 million from $121 million last year, because of higher advertising costs and stock-based compensation charges.

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
9/14/01)
CONSUMER CATALOGS Blair Corp. 157,063 164,093 4% 8,286 5,479 (34%) 6/30/01 12.10
Brookstone 68,699 69,612 1% (399) (2,761) (592%) 8/4/01 9.21
Coldwater Creek 96,540 112,868 17% 3,595 1,377 (62%) 6/2/01 22.01
Concepts Direct 11,177 9,762 (13%) (1,850) (1,441) 22% 6/30/01 N/A
Delia’s 37,295 25,955 (30%) (10,493) (10,976) (5%) 8/4/01 N/A
J. Jill Group 51,494 66,193 29% 2,039 2,579 26% 6/30/01 12.99
Geerlings & Wade 9,363 7,846 (16%) (357) (128) 65% 6/30/01 N/A
Hanover Direct 143,406 133,507 (7%) (13,686) 12,732 NM 6/30/01 N/A
J.C. Penney Co. 7,207,000 7,211,000 0% (19,000) (53,000) (179%) 7/28/01 N/A
Jos. A. Bank 44,869 46,106 3% 611 291 (52%) 8/4/01 8.20
Lands’ End 275,625 285,821 4% (1,881) 3,040 NM 7/27/01 22.43
Lillian Vernon Corp. 41,973 39,693 (5%) (2,053) (3,903) (90%) 5/26/01 N/A
Sharper Image 82,463 82,797 0% 1,184 (3,694) NM 7/31/01 8.97
Spiegel 836,250 785,017 (6%) 25,840 5,029 (81%) 6/30/01 13.89
Successories 12,208 9,693 (21%) (272) (2,833) (942%) 8/4/01 N/A
The Talbots 361,244 384,295 6% 14,618 17,816 22% 8/4/01 16.68
Williams-Sonoma 366,484 428,994 17% 5,063 1,352 (73%) 7/29/01 33.37
MARKET INDICES Dow Jones Industrial Average 24.35
Standard & Poor’s 500 Index 29.64
Notes: Price-to-earnings ratios are from various sources
NM = not meaningful
NA = not available
Source: Ulin & Holland

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