Financial Update: Midyear Malaise for Consumer Mailers

Many consumer catalogers hoping that the second quarter of 2002 would show signs of an economic recovery were disappointed. During the second quarter, 53% of the publicly traded consumer catalogers and cataloger/retailers tracked by Catalog Age suffered a drop in second-quarter sales.

On the bright side, only four of the catalogers — Concepts Direct, Geerlings & Wade, Hanover Direct, and Lillian Vernon Corp. — “reported worse bottom lines,” notes Jim Adams, managing director of Wellesley MA-based Tully & Holland, which tracks the companies for Catalog Age. That’s probably due to cost controls and reduced circulation, he says.

CATALOG AGE’S SPOTLIGHT ON SECOND-QUARTER FINANCIALS

Net Income narrows at Hanover

Quarter ended: June 29
Hanover Direct’s turnaround, which began in January 2001, continues. Although second-quarter net revenue fell 15%, the company’s net income narrowed from $12.7 million last year to $1.8 million this year. Hanover’s titles include The Company Store, Silhouettes, International Male, Scandia Down, and Gump’s by Mail.

The skinny: Hanover’s turnaround efforts haven’t stalled. A closer look reveal’s last year’s stellar net income was inflated by one-time gains from sales of catalogs, but “operationally, Hanover did better this year,” Adams says.

Williams-Sonoma’s income up 10 times

Quarter ended: Aug. 4
The big winner this quarter, San Francisco-based Williams-Sonoma, which includes the eponymous title and the Pottery Barn brands, saw its second-quarter net earnings surge from nearly $1.4 million last year to $14.1 million.

Net revenue, including shipping fees, increased 16%, to $495.6 million from $429.0 million last year. Net catalog and Internet sales increased 12%, to $177.1 million from $158.3 million a year ago. Strong growth from the company’s Pottery Barn and Pottery Barn Kids catalogs, along with incremental sales from the West Elm catalog, which was launched in the first quarter of 2002, drove the increase. On the retail side, net sales increased 17%, to $285.8 million. But comparable store sales were flat.

The skinny: Williams-Sonoma’s gross margins improved thanks to more full-price sales, fewer markdowns, and lower freight costs from the distribution center to the stores.

J. Jill reports best second quarter to date

Quarter ended: June 29
Thanks to strong sales of full-price spring and summer merchandise and fewer promotions, women’s apparel cataloger/retailer J. Jill Group had the most profitable second quarter in its history. Net income for the Quincy, MA-based company increased 149%, to $6.4 million, compared with $2.6 million last year. Net sales were $86.4 million, a 31% increase from $66.2 million a year earlier. Catalog and Internet sales for the period rose 11%, to $56.0 million, thanks in part to increased circulation, while retail sales increased 90%.

The skinny: J. Jill’s retail division represented 35% of the company’s total second-quarter sales volume, compared with 24% last year.

Coldwater Creek doubles net income

Quarter ended: June 1
Despite a slight dip in sales, Coldwater Creek managed to double its second-quarter net income. The apparel cataloger/retailer reported net income of $2.8 million on net sales of $112.0 million. For the previous second quarter, the Sandpoint, ID-based company had netted $1.4 million on $112.9 million in sales. Direct sales, which consist of revenue from outlet stores, catalogs, and the Internet, fell nearly 15%, to $88.5 million from $103.7 million a year ago. But Web sales rose 11%, to $38.5 million from $34.7 million. Retail store sales more than doubled, to $23.5 million from $9.1 million.

The skinny: Though direct sales dropped 15%, Coldwater also mailed 14% fewer catalogs than it had a year ago.

Improved margins fuel Sharper Image

Quarter ended: July 31
High-tech gadgets cataloger/retailer Sharper Image reduced its second-quarter net loss to $627,000 from last year’s $3.7 million. Total revenue increased 24%, to $102.4 million from $82.8 million. Catalog sales increased 33%, to $29.0 million from $21.8 million. Store sales rose 20%, to $58.4 million; comparable store sales were up 5%. Internet sales increased 23%, to $12.2 million from $9.9 million.

The skinny: The San Francisco-based company still ended the second quarter in the red, but proprietary products have allowed it to increase gross margin.

Jos. A. Bank sets company record

Quarter ended: Aug. 3
Hampstead, MD-based cataloger/retailer Jos. A. Bank Clothiers ended a better-than-expected first half of the year by announcing record second-quarter sales. For the three months ended Aug. 3, Bank’s net sales were $51.9 million, up 12% from $46.1 million for the second quarter of 2001. Combined catalog and Web sales rose 34%, to $7.4 million from $5.5 million. Net income rose 224%, to $942,000 from $291,000 last year.

The skinny: No real surprise here: Jos. A Bank has increased its earnings guidance for the second half of fiscal year 2002 — and may increase it for the full year.

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 9/17/02)
CONSUMER CATALOGERS Blair Corp. 164,093 147,513 (10%) 5,479 7,033 28% 6/30/02 9.86
Coldwater Creek 112,868 112,027 (1%) 1,377 2,772 101% 6/1/02 49.83
Concepts Direct 9,762 11,822 21% (1,441) (3,063) (113%) 6/30/02 N/A
Delia’s 25,955 26,154 1% (10,976) (7,061) NM 8/3/02 N/A
Geerlings & Wade 7,846 6,208 (21%) (128) (2,331) (1,721%) 6/30/02 N/A
Hanover Direct 133,507 113,852 (15%) 12,732 1,816 (86%) 6/29/02 N/A
J. Jill Group 66,193 86,355 30% 2,579 6,415 149% 6/29/02 21.86
Lillian Vernon Corp. 39,693 36,889 (7%) (3,903) (4,855) (24%) 5/25/02 N/A
Successories 11,086 10,264 (7%) (1,562) (963) NM 5/4/02 N/A
CATALOGER/RETAILERS Brookstone 69,612 71,231 2% (2,761) (2,247) NM 8/3/02 22.44
J.C. Penney Co. 7,211,000 7,198,000 0% (53,000) (6,000) NM 7/27/02 28.50
Jos. A. Bank 46,106 51,868 12% 291 942 224% 8/3/02 16.92
Sharper Image 82,797 102,408 24% (3,694) (627) NM 7/31/02 36.41
Talbots 384,295 370,407 (4%) 17,816 20,034 12% 8/3/02 16.78
Williams-Sonoma 428,994 495,593 16% 1,352 14,141 946% 8/4/02 30.13
MARKET INDICES Dow Jones Industrial Average 21.7
Standard & Poor’s 500 Index 33.29
Notes: Price-to-earnings ratios are from various sources
NM = not meaningful
NA = not available
Source: Tulley & Holland

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