First-quarter sales up, profits not

Aug 01, 2006 9:30 PM  By

Of the 12 publicly traded consumer merchants tracked by Multichannel Merchant, all but three showed increases in first-quarter sales. And for most of those companies, the growth was in the double digits.

“Multichannel merchants experienced significant increases in revenue this quarter as compared to the same quarter in 2005,” says Stuart Rose, managing director of Wellesley, MA-based investment bank Tully & Holland. Gaiam led the pack with a 97% rise in sales, while women’s apparel cataloger/retailer Coldwater Creek and menswear merchant Jos. A. Bank Clothiers grew revenue 38% and 18% respectively.

On the other side of the ledger, however, the news wasn’t so good. Seven of the 12 companies saw lower year-over-year earnings, a wider year-over-year loss, or in the case of apparel and home goods mailer Blair Corp., a profit turn into a loss.

Gaiam records huge first quarter

Quarter ended: March 31 The facts: First-quarter sales for the Broomfield, CO-based manufacturer/marketer of “healthy living” products hit nearly $51.8 million, way up from $26.3 million a year ago. What’s more, Gaiam’s bottom line rocketed up 667%, reaching $890,000, up from $116,000 a year ago. “The results for the quarter confirm that Gaiam’s media-focused strategy is working,” Gaiam president Lynn Powers said in a statement, referring to the company’s acquisition of bankrupt media company Good Times Entertainment last summer for $40 million. “This quarter also marked our successful entry into the nontraditional retail environment as we placed our media and products in Jenny Craig locations nationwide.” Gaiam sells direct to consumers via its Harmony, Real Goods, and Living Arts catalogs in addition to wholesaling to retailers. The skinny: How much did the acquisition of Good Times contribute to Gaiam’s results for the quarter? Internal revenue growth measured 28% — nothing to sniff at, but far below the overall sales growth of 97%.

Mixed results for Jos. A. Bank

Quarter ended: April 29 The facts: Hampstead, MD-based cataloger/retailer Jos. A. Bank Clothiers registered a solid 18% increase in first-quarter sales, to $113.7 million. But net income dropped 13%, to $5.9 million from $6.7 million for the comparable period of 2005. “While our sales of new transitional spring products remained consistent with last year, gross profits declined primarily as a result of increased customer demand for fall [2005] merchandise, resulting in less demand for the year-round core merchandise,” chief financial officer David Ullman said in a statement. “Our new spring products continue to show strong sales in May and early June, so we expect our year-over-year profits to increase at least 10% in the second quarter of fiscal 2006.” The skinny: “The fall merchandise was sold at lower margins because it was out of season,” Rose said. “This is done at low margins and cannibalized year-round core merchandise.”

More red ink at RedEnvelope

Quarter ended: April 2 The facts: Sales for the San Francisco-based gifts cataloger fell 1%, to $22.0 million. The net loss widened, meanwhile, from $3.1 million to $4.5 million. Gross profit margin was approximately 48.8% in the fourth quarter of fiscal 2006, compared with 47.4% the previous fourth quarter. In a statement, company officials said they intend to “significantly reduce” shipping promotions, such as free shipping, going forward. RedEnvelope also hopes to improve its margins by continuing to shift its product mix to higher-margin products developed by its inhouse design team and sourced overseas. In addition, it wants to find ways to improve the print catalog’s efficiency as a marketing tool, by changing circulation, product assortment, and creative presentation. As of April 2, RedEnvelope had $10 million in cash and short-term investments and no debt. Capital expenditures for fiscal 2006 were approximately $3.1 million; it expects to bump that up to about $3.5 million this fiscal year. The skinny: Contributing to RedEnvelope’s loss, says Tully & Holland’s Rose, was an increase in leadership transition costs, which totaled $1.5 million. Alison May resigned as CEO in January after four years at the helm and was replaced by Ken Constable in February.

Company 2Q REVENUE 2Q NET INCOME (LOSS)
12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
(000) (000)
1-800-Flowers.com $157,033 $180,017 15% ($2,046) ($1,540) NM
Blair Corp. 107,558 102,683 (5%) 650 (4,795) NM
Coldwater Creek 155,636 215,261 38% 8,491 11,572 36%
Delia’s 44,665 51,870 16% (12,493) (1,220) NM
Gaiam 26,324 51,752 97% 116 890 667%
J.C. Penney Co. 4,118,000 4,220,000 2% 172,000 210,000 22%
Jos. A. Bank Clothiers 96,575 113,665 18% 6,737 5,861 (13%)
RedEnvelope 22,199 22,044 (1%) (3,082) (4,483) NM
Sharper Image Corp. 144,882 106,848 (26%) (4,576) (12,625) NM
The Sportsman’s Guide 64,578 71,648 11% 2,257 2,204 (2%)
The Talbots 446,531 453,012 1% 34,519 27,356 (21%)
Williams-Sonoma 720,688 794,286 10% 26,173 23,099 (12%)
Notes: NM = not meaningful Source: Tully & Holland