First-quarter profits lag behind sales

The first quarter of 2005 proved to be a mixed bag for the publicly traded consumer mailers tracked by Multichannel Merchant.

Sales were strong for the quarter, just as they were in first quarter of 2004. In fact, all but three of the 15 publicly traded catalogers/retailers tracked bested their first-quarter sales from the previous year. (Warren, PA-based apparel and decor cataloger Blair Corp., Hingham, MA-based women’s apparel cataloger/retailer J. Jill Group, and San Francisco-based gadgets merchant Sharper Image Corp. were the exceptions.)

Says Tim Tully of Wellesley Hills, MA-based investment bank Tully & Holland, which tracks the companies for Multichannel Merchant, “The growth can largely be attributed to a focus on core business strengths combined with expansion of retail locations, complementary additions to existing product lines, strengthening of multichannel strategies, and investments made to increase catalog circulation.”

Because of such investments, profit growth proved more elusive than revenue growth. Only 53% of the companies showed a bottom-line improvement, compared with 88% a year ago.

Brookstone’s loss widens

Quarter ended: April 30 The facts: Merrimack, NH-based cataloger/retailer Brookstone lost $6.8 million for the quarter, compared with a net loss of $4.6 million for the first quarter of last year. Total sales rose 4%, however, to $80.3 million, with catalog/Internet sales up 12%, to $13.2 million. Brookstone generated $1.2 million of the increase primarily by boosting catalog circulation 36%; the Gardeners Eden brand (which the company is selling) had flat sales on a 12% decrease in catalog circulation. The skinny: Brookstone generated $300,000 shipping and handling revenue during the quarter.

Loss widens at RedEnvelope too

Quarter ended: April 3 The facts: San Francisco-based gifts merchant RedEnvelope enjoyed a 28% leap in first-quarter revenue, to $22.2 million. But that wasn’t enough to reverse its net loss — or even to keep it from growing. The net loss for the quarter was $3.8 million, compared with $2.3 million last year. The culprit: a 53% jump in cost of sales. The skinny: A protracted and expensive proxy fight for control of the company didn’t help the bottom line any.

Sharper Image takes a fall

Quarter ended: April 30 The facts: Total first-quarter revenue for the high-tech gifts and gadgets merchant fell 7%, to $144.9 million from last year’s $156.4 million. Direct marketing sales (including wholesale) tumbled 12%, to $39.7 million from $45.1 million. Even Internet sales fell — 12%, to $23.2 million. On the other side of the ledger, the company reported a net loss of $4.6 million, compared with net earnings of $1.9 million the previous first quarter. The skinny: How’s this for a comparison: During the first quarter of 2004, Sharper Image’s catalog sales had increased 40%.

Gaiam reverses its fortunes

Quarter ended: March 31 The facts: After several quarters of losses, Broomfield, CO-based manufacturer/marketer Gaiam posted net income of $116,000 for the quarter, compared with a $329,000 net loss last year. Sales for the company, which mails the Real Goods, Living Arts, and Harmony catalogs of healthy-living products, increased 11%, to $26.3 million from $23.8 million. The wholesale division accounted for much of the gain, largely as a result of increased volume generated by the shelf space expansion and additional media placements in Target stores. But direct-to-consumer revenue increased too — 10%, to $13.3 million, thanks to Web sales. The skinny: Gaiam’s direct and business-to-business units were both on the plus side of contribution margin (net sales minus cost of goods sold and direct expenses.) Direct-to-consumer contributed $166,000, compared with a $24,000 loss the previous year. The business unit kicked in $121,000, compared with a $305,000 loss a year ago.

Company 12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
(000) (000) $134,069 $157,033 17% $1,943 ($2,046) NM
Alloy 83,859 87,697 5% (9,243) (15,899) NM
Blair Corp. 128,642 107,558 (16%) 571 650 14%
Brookstone 77,451 80,284 4% (4,644) (6,779) NM
Coldwater Creek 124,460 155,636 25% 5,320 8,491 60%
Gaiam 23,775 26,324 11% (329) 116 NM
J.C. Penney Co. 4,033,000 4,192,000 4% 41,000 172,000 320%
J. Jill Group 99,929 98,369 (2%) 2,237 (2,708) NM
Jos. A. Bank Clothiers 79,929 96,575 21% 5,271 6,737 28%
RedEnvelope 17,336 22,199 28% (2,261) (3,832) NM
Sharper Image Corp. 156,405 144,882 (7%) 1,915 (4,576) NM
The Sportsman’s Guide 44,594 64,326 44% 1,167 2,096 80%
The Talbots 412,181 446,531 8% 33,464 34,519 3%
Vermont Teddy Bear Co. 20,100 25,600 27% 1,389 221 (84%)
Williams-Sonoma 640,910 720,688 12% 21,390 26,173 22%
Notes: Price-to-earnings ratios are from various sources
NM = not meaningful
Source: Tully & Holland

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