Good, not great

Feb 01, 2005 10:30 PM  By

While holiday 2004 sales were adequate for most of the merchants contacted by Catalog Age, overall results hardly suggest that a robust economic recovery is under way. “Our sense is that few had a great year,” says Bill LaPierre, vice president, catalog brokerage at Peterborough, NH-based list services firm Millard Group. “The majority were just at plan, and many others were 5%-7% below plan.”

Food catalog Swiss Colony is a case in point. Its holiday sales increased 5%-6% on the same increase in circulation, which “wound up pretty close” to expectations, says president John Baumann. One problem the Monroe, WI-based title ran into was inventory shortfalls. From mid-November until Christmas, Swiss Colony was running short on almost all its products. Baumann says the issue did not significantly hurt sales, though, because the company was able to manufacture extra quantities of products and to train call center reps to suggest similar products to customers ordering out-of-stock items.

The other catalogs owned by Swiss Colony’s parent company, also named Swiss Colony, “were on budget,” Baumann says. These include general merchandise titles Ginny and Seventh Avenue, and women’s apparel and home decor books Midnight Velvet and The Country Door. “Our [overall] sales were up 5% for the year. We didn’t do anything dramatically new in the catalogs, and the circulation was up slightly over 2003.”

Like Swiss Colony, the Spiegel Catalog experienced product shortfalls. Holiday sales for the general merchant came in about 5%-10% below plan, says Geralynn Madonna, CEO of New York-based Catalog Holdings Corp., parent company of Spiegel Catalog and women’s apparel title Newport News. The company had slashed circulation of the core Spiegel book 50%, to less than 2 million.

Catalog Holdings Corp., which was formed by Spiegel senior management and San Francisco-based private equity firm Golden Gate Capital this past summer, bought the two catalogs from Downers Grove, IL-based Spiegel Group, which had filed for bankruptcy in March 2003. The transition period affected the company’s ability to stock up for holidays, Madonna says, so the catalogs suffered many cancellations from customers due to backorders. “But considering where we were when we bought [Spiegel] in July — moving all of the inventory from Ohio to Virginia, getting all of the IT on one platform — the holiday was pretty successful,” Madonna says.

And in fact, Newport News fared rather well: Despite a 14% cut in fall/holiday circulation, fall/holiday revenue was up 8%. Madonna attributes the performance in part to fewer promotions and markdowns. Newport News’ holiday business is not as large as Spiegel’s, however.

Total holiday sales were 2% below plan at Oshkosh, WI-based Miles Kimball Co., says president Mike Muoio. Yet the total number of orders increased “in the single digits” against plan. The $203.0 million multititle mailer includes low-end gifts book Miles Kimball, gifts and housewares title Walter Drake, garden and home decor catalog The Home Marketplace, and Exposures, a photo and archival accessories title. Miles Kimball is owned by $1.3 billion Greenwich, CT-based candles and home decor products manufacturer Blyth.

“Our demand in terms of total orders was about 2% over but 2% under in dollars,” Muoio says. “We got lots of orders, but they were getting smaller, so our average order size went down.”

Retailers’ emphasis on price cutting and promotions may be partly to blame. “Retail is having a much bigger impact on mail order sales than in years past,” Millard Group’s LaPierre contends. “It’s always been an issue, but more so this year. The sheer number of retail sales is eating into our traditional catalog business. And catalogers are not keeping up with the fact the consumer is looking for more value,” he says, citing the rise of the dollar stores.

Brick-and-mortar woes

But even multichannel merchants that sell via stores suffered. Total holiday sales at women’s apparel cataloger/retailer J. Jill fell short of goal, rising just 4%, to $119.0 million. Direct sales were especially disappointing, although at press time the Quincy, MA-based company had yet to release full results. “Since early November, the top-line performance in our direct business has not met our expectations, as we experienced a significant shift of customers toward our retail segment,” president/CEO Gordon Cooke said in a statement. He added that some of J. Jill’s retail initiatives “could potentially be detracting from the performance of our direct segment.”

Catalog sales slipped at San Francisco-based gadgets merchant Sharper Image. Total December catalog/direct marketing sales (including wholesale) fell 3%, to $23.0 million compared with $23.9 million for December 2003. Total Sharper Image sales rose a disappointing 6%, to $164.3 million, while comparable store sales decreased 7%.

Like Spiegel, Sharper Image blamed some of its weak performance on stock shortages. For example, Sharper Image couldn’t get its hands on sufficient quantities of Apple Computer’s popular iPod. The iPod doesn’t carry great margin for Sharper Image but does generate store traffic, says Sharper Image spokesperson Tersh Barber. The lack of iPods in stores “probably hurt us in other areas, like Sharper Image-designed and Sharper Image-branded electronics.”

The West Coast port slowdown also hurt Sharper Image’s in-stock position, Barber says. Beginning in July, congestion at the ports and a shortage of dockworkers created havoc for marketers and led to delays in inventory deliveries. The slowdown, which eased in November, “left us tighter than we would have liked,” Barber says.

Another San Francisco-based cataloger/ retailer, Williams-Sonoma, also deemed holiday sales “disappointing.” Net revenue increased only 7%, to $775.9 million for the eight weeks ended Dec. 26. According to a statement, the company’s Pottery Barn home decor brand saw a “weaker than expected consumer response” in its direct and retail channels. The company’s total direct-to-customer net sales for the holiday period increased 9%, to $235.5 million. Retail net sales increased 7%, to $501.1 million. In addition to the eponymous kitchenware brand and Pottery Barn, Williams-Sonoma’s businesses include home furnishings and storage brands West Elm and Hold Everything.

Merrimack, NH-based cataloger/retailer Brookstone, which mails the Brookstone, Hard-to-Find Tools, and Gardeners Eden catalogs, said direct-to-consumer holiday sales increased 26%, to $42 million for the nine weeks ended Jan. 1. Internet sales gained 34%. Total sales increased 8%, to $215 million. Yet same store sales fell short of goal, leaving Brookstone disappointed in its overall holiday performance. The company blamed its lackluster season in part on disappointing sales of massage and audio products.

Some cause for celebration

That’s not to say all mailers suffered during the season. Holiday sales at Dallas-based Neiman Marcus Direct, which mails the upscale Horchow and Neiman Marcus catalogs, increased 14%. Revenue at parent company Neiman Marcus increased 8%, to $585 million, and comparable revenue in its specialty stores, which include Bergdorf Goodman, rose 10%.

Another luxury brand, New York-based Vivre, finished 2004 with a 56% year-over-year boost in holiday revenue. Even so, back in August the company had expected even more robust sales, says CEO Eva Jeanbart-Lorenzotti. “We credit this to two influences on consumer spending at the end of the year: an early November that was not as strong as expected due to the elections, and the fact that brick-and-mortar merchants began discounting much earlier than normal.”

Freeport, ME-based L.L. Bean has no complaints about the holiday season. For the four weeks leading up to Christmas, sales were up 10% from the previous year, says Rich Donaldson, spokesperson for the apparel and outdoor gear merchant. And considering that Christmas 2003 had been Bean’s best ever, he adds, “we had pretty conservative estimates for 2004.” Donaldson attributes the strong showing in part to more television advertising and continued e-mail promotions to goose traffic to the Website.

Also happy is Toni Morell, managing partner of Ann Arbor, MI-based Zingerman’s. The food gifts mailer’s holiday sales rose 25% from 2003. Morell credits the results to its circulation hike: The company mailed 700,000 holiday catalogs in 2004, up 59% from the previous year. Zingerman’s also rented more names — 500,000 for holiday ’04, vs. 300,000 for holiday ’03.

“We mailed deeper into the co-op models from [database solutions provider] Abacus that were successful in the past,” Morell explains. “We also tested new Abacus models, and for the first time we tested names from some of the other co-ops.”

Zingerman’s average order value rose to $63.18 for holiday 2004, up 36% from the previous year. And customers were placing orders later in the season: The mailer received 26% more orders the week of Dec. 13 than it had the previous year.

Waiting for the procrastinators

For certain, consumers’ buying later and later for Christmas continues to be a trend. According to East Greenwich, RI-based catalog consultant Coy Clement, merchants that moved a mailing from November to December or added a December mailing tended to do better than those that didn’t.

Westbury, NY-based multichannel merchant 1-800-Flowers.com can attest to the increase in last-minute demand. “Customer shopping patterns confirmed our marketing strategy, which included shifting a significant portion of our efforts — online advertising, off-line broadcast advertising, and direct marketing programs — to later in the quarter,” CEO Jim McCann said in a company statement. “As a result, during December we achieved double-digit growth in several of our key holiday gift categories, including gourmet food gifts, gift baskets, and children’s gifts.”

The growth wasn’t enough however. Although total holiday sales increased 8%, to $230 million, results fell short of 1-800-Flowers.com’s expectations. The company’s brands include home and garden title Plow & Hearth, toys titles HearthSong and Magic Cabin Dolls, and food gifts book The Popcorn Factory.

Food catalogers in particular pushed back their marketing efforts to cater to late shoppers, says Tony Cox, president of Richardson, TX-based consultancy Catalog Solutions. Happily the calendar worked in their favor this year as well: “We had two extra shipping days this year because Christmas fell on a Saturday instead of a Thursday,” he says.

Of the 650 holiday food catalogs that Catalog Solutions received in 2004, 19% came in December, up from the 16% the previous year and 14% in 2002. “Mailers are sensing that customers are ordering later and later, and responding by putting more catalogs in the mail at the beginning of December,” Cox says. Catalog Solutions has statistics that support his claim: Christmas week 2003 accounted for 10.9% of the total month’s sales; during that same week in 2004, 11.9% of the total month’s sales were accrued.

In fact, Medford, OR-based food gifts mailer Harry and David, part of $592.6 million Bear Creek Corp., based an entire advertising and public relations campaign around its ability to fulfill orders received up until Dec. 23 for Christmas delivery, says Bill Ihle, senior vice president of corporate relations. The company mailed its last holiday catalog a scant two weeks before Christmas.

Final numbers were not available at press time, but overall Bear Creek expects holiday sales to come out in the “high single digits to low double digits” above the previous year’s, Ihle says. Holiday circulation was up 10% from 2003, with the majority of the additional mailings going to house file names.

Mustard Museum

Holiday sales were flat at Mount Horeb, WI-based food gift cataloger Mustard Museum. But president Mike Carr isn’t complaining, since Mustard Museum cut its circulation 54%, to 55,000 catalogs from 98,000 during the 2003 holiday season.

Mustard Museum stopped prospecting altogether for holiday because it had made several changes to the catalog. “We wanted to get our house numbers up before we could prospect effectively,” Carr says. Among the changes, the page count was trimmed from 32 to 20 pages. The cataloger also used a heavier paper stock for the cover.

But the catalog’s most significant changes were in merchandising. Mustard Museum added more gift items, such as sets of deli mustards, and more products that could be consumed immediately, such as sausage, pretzels, and crackers. “We realized that in the past we were more [focused on] creative and less on the merchandise,” Carr says. “This year we’ve flip-flopped it.” By modifying its photography and copy, Mustard Museum ensured that the merchandise, not the creative, was the star.

Frederick’s of Hollywood

At women’s apparel cataloger/retailer Frederick’s of Hollywood, holiday sales rose 6% from 2003, says Danielle Savin, general manager of the company’s direct division.

The average order value increased 10%, but response actually declined somewhat, she admitted, and retail sales were lower than expected. Frederick’s had boosted its catalog circulation 8% and had high hopes for holiday, based on what Savin describes as a “phenomenal” September and October.

Holiday sales at a glance

Title Sales plan Actual vs. 2003
B.D. Jefferies (upscale gifts) up significant amount met expectations
Bissinger’s (candy) single-digit increase up 11%
Brookstone (gadgets, tools) N/A up 8% to $215 million
Cane River Pecan Co. (food) 60% growth 100% increase on 129% circ increase
Chelsea Market Baskets (food) 40% growth double-digit increase on a 50% circ hike
Cushman’s (fruit) low double-digit increase up 7% on 5% circ hike
Crutchfield (electronics) single-digit increase up 10%-15% over plan and over last year
Frederick’s of Hollywood (women’s apparel) 10% increase up 6% on an 8% circ increase
Harry and David (food) mid-single-digits increase up by “high single digits to low double digits” on a 10% circ increase
J. Jill (women’s apparel) N/A up 4% to $119.0 million
Jos. A. Bank (men’s apparel) N/A up 34%, above expectations
J.C. Penney Corp. (gen. merch) N/A up 7% to $400 million
L.L. Bean (apparel, gear) single-digit increase up 10%
Monastery Greetings (food) up 15% met expectations on 15% circ hike
Miles Kimball (gifts) up single digits 2% below plan
Mustard Museum (food) flat to down 10% “about even” on a 54% circ cut
Neiman Marcus Direct (upscale apparel, decor) N/A up 14%
Newport News (apparel) single-digit increase up 5% on 14% circ cut
Potpourri Collection (gifts) single-digit increase up by “strong double digits” on 35% circ. hike
Sharper Image Corp. (gadgets) N/A up 6%, short of goal
Spiegel Catalog (gen. merch) single-digit increase 5%-10% below plan on a 50% circ cut
Urban Outfitters (apparel, decor) N/A direct sales up 57% (inc. Anthropologie)
Vivre (upscale gifts) high double-digit increase up 56% on a 12% circ hike
Victoria’s Secret Catalog (women’s apparel) N/A up 12% in December
Williams-Sonoma (decor) N/A up 7%, below expectations
Zingerman’s (food) up 25% up 25% on 59% circ hike

Potpourri Group

With an increased circulation of 35% due to the acquisition and mailing of toys title Young Explorers, and thanks to organic growth of its other titles, Medfield, MA-based multititle mailer Potpourri Group enjoyed strong double-digit sales gains this holiday season. “Last year was good, but this was even a little better,” says president Jack Rosenfeld. Sales beat expectations by single digits.

Unlike some of his peers, Rosenfeld credits a strengthening economy for the company’s solid performance, which includes an increase in catalog average order sizes. “It indicated that people had a little bit more money to spend,” he says. Potpourri’s customers are primarily over the age of 45 with an average household income of $73,000.

Only two of Potpourri’s 12 gift and craft catalogs, which include Back in the Saddle, The Stitchery, and Expressions, offered shipping or gift-with-purchase promotions. Rosenfeld says Potpourri Group tries not to run promotions during the holidays because it is the company’s strongest season.