A solid number of publicly traded consumer merchants were able to improve both their sales and their profitability during the second quarter of the year. Sandpoint, ID-based women’s apparel cataloger/retailer Coldwater Creek, Hampstead, MD-based men’s apparel cataloger/retailer Jos. A. Bank Clothiers, and South St. Paul, MN-based outdoor gear mailer The Sportsman’s Guide were among those posting double-digit increases on both sides of the ledger.
But a number of other companies were challenged by growing operating expenses. Tim Tully, managing director at Wellesley Hills, MA-based investment bank Tulley & Holland, which tracks the publicly traded marketers for Multichannel Merchant, numbers gifts merchants 1-800 Flowers.com and RedEnvelope among them. “Some of the companies, while registering strong top-line growth, had earnings negatively affected by higher catalog costs, increased paper costs, and higher page circulation,” Tully says.
In all, 71% of the merchants tracked improved their second-quarter revenue, down from 81% last year. As for profits, 57% of the marketers tracked bettered the bottom line, compared with 69% last year.
Net loss widens at Brookstone
Quarter ended: July 30 The facts: Merrimack, NH-based Brookstone reported a net loss of $5.7 million, compared with a much more modest loss of $465,000 last year. This year the second-quarter loss includes a write-off of the assets of Gardeners Eden as well as related severance costs, totaling $4.1 million. The gadgets and tools cataloger/retailer said in late June it planned to divest itself of Gardeners Eden, which sells gardening accessories. Direct marketing sales for Brookstone’s three titles (Brookstone, Hard-to-Find Tools, and Gardeners Eden) fell 2%, to $13.1 million, on an 11% reduction in circulation. Total sales for the quarter fell 7%, to $87.5 million, while same-store sales dropped 10%. The skinny: It appears all five Gardeners Eden stores are closing. According to Brookstone, Gardeners Eden’s remaining assets include $2.1 million in inventory and $2.9 million in property and equipment.
Penney’s direct sales up 7%
Quarter ended: July 30 The facts: Plano, TX-based J.C. Penney Co.’s second-quarter earnings from continuing operations more than doubled to $0.46 per share from $0.22 per share last year. What’s more, the general merchant’s net income soared to $131 million from $1 million. In the year-ago quarter, however, Penney had taken a $67 million charge relating to the sale of the Eckerd Drugstore business. Total net sales increased 5%, to $3.98 billion, and same-store sales rose 4%. Direct sales climbed 7%, primarily as a result of Web sales, which increased more than 30%. Operating profit was $213 million, compared with $149 million last year. The skinny: Five Penney stores in the Gulf Coast were closed as a result of Hurricane Katrina in late August; these stores had accounted for about 0.5% of its 2004 sales.
RedEnvelope sees more red ink
Quarter ended: July 3 The facts: The net loss at San Francisco-based gifts cataloger RedEnvelope widened to nearly $1.8 million from $952,000 last year. That’s despite an 18% boost in revenue, to $25.0 million from $21.1 million for the comparable quarter of 2004. The increased loss wasn’t unexpected, though, according to a statement from president/CEO Alison May: “It met our expectations as we invested in brand-building advertising this quarter and are now fully staffed…having filled a number of key positions in areas such as marketing, information technology and product development.” The company said the print catalog had performed below expectations but that the online channel had exceeded expectations. The skinny: To take advantage of a strong category, Red Envelope in June test-mailed a jewelry catalog to an unspecified number of customers.
| 2Q REVENUE | 2Q INCOME (LOSS) | |||||
|---|---|---|---|---|---|---|
| Company | 12 months prior | Current quarter | Increase (decrease) | 12 months prior | Current quarter | Increase (decrease) |
| (000) | (000) | |||||
| 1-800-Flowers.com | $161,567 | $186,118 | 15% | $30,429 | $3,901 | (87%) |
| Alloy | 81,852 | 89,202 | 9% | (11,155) | (3,059) | NM |
| Blair Corp. | 126,993 | 120,835 | (5%) | 5,011 | 6,064 | 21% |
| Brookstone | 93,749 | 87,521 | (7%) | (465) | (5,749) | NM |
| Coldwater Creek | 111,215 | 154,569 | 39% | 3,338 | 6,982 | 109% |
| Gaiam | 17,031 | 21,706 | 27% | (2,215) | (766) | NM |
| J.C. Penney Co. | 3,778,000 | 3,981,000 | 5% | 1,000 | 131,000 | 13,000% |
| J. Jill Group | 120,561 | 117,417 | (3%) | 6,529 | 3,870 | (41%) |
| Jos. A. Bank Clothiers | 81,994 | 98,588 | 20% | 3,432 | 5,339 | 56% |
| RedEnvelope | 21,131 | 24,978 | 18% | (952) | (1,752) | NM |
| Sharper Image Corp. | 148,963 | 137,296 | (8%) | 93 | (6,777) | NM |
| The Sportsman’s Guide | 39,553 | 63,778 | 61% | 1,240 | 2,507 | 102% |
| The Talbots | 401,553 | 449,577 | 12% | 19,351 | 18,876 | (2%) |
| Williams-Sonoma | 689,621 | 776,239 | 13% | 27,629 | 30,823 | 12% |
| Notes: NM = not meaningful Source: Tully & Holland |
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