Most experts agree that consumers are beginning to feel optimistic about an economic recovery. But you wouldn’t know it from first-quarter results of the publicly traded consumer marketers tracked by Catalog Age.
“There hasn’t been any overall improvement in this quarter,” says Jim Adams, managing director of Wellesley, MA-based investment bank Ulin & Holland. In fact, the numbers are slightly worse. Nine of the 13 catalogers tracked, or 69%, increased their first-quarter sales this year, compared with 73% last year. And only six, or 46%, showed bottom-line improvements, compared with 60% last year.
“It’s costing more to get new customers,” Adams says. Indeed, selling expenses as a percentage of sales have increased in recent years, as mailing lists have become less responsive.
CATALOG AGE SPOTLIGHT ON FIRST-QUARTER FINANCIALS
Net Income Jumps at Coldwater Creek
Quarter ended: May 3
The facts: Better-than-expected retail sales fueled first-quarter growth at women’s apparel marketer Coldwater Creek. Net income for the Sandpoint, ID-based company increased 35%, to $1.9 million from $1.4 million last year. Net sales increased 8%, to $115.2 million from $106.2 million last year. Catalog sales increased less than 1%, to $46.0 million from $45.9 million. And e-commerce sales actually declined, to $35.9 million from $36.1 million.
The skinny: Coldwater Creek mailed 29.9 million catalogs during the quarter, 6% fewer than the 31.7 million catalogs it mailed in the first quarter of 2002.
Blair’s 1Q Income Tumbles 91%
Quarter ended: March 31
The facts: First-quarter net sales at apparel and home goods cataloger Blair Corp. increased slightly, to $137.0 million from $135.3 million last year. That’s the good news. The not-so-good news? Net income plunged 91%, to $500,189 from $5.6 million last year. Blame it largely on a 13% rise in advertising expenses, resulting from an increase in mailings to customers and prospects.
The skinny: The expense of mailing 38% more catalogs — 52 million compared with 38 million for the first quarter of last year — ate into income without significantly boosting sales.
Sales Up, Income Down for Williams-Sonoma
Quarter ended: May 4
The facts: A 12% increase in first-quarter sales wasn’t enough to enable Williams-Sonoma to stave off a drop in income. The San Francisco-based cataloger/retailer, whose home decor and houseware brands include Pottery Barn and Hold Everything, netted $13.4 million on revenue of $536.8 million. For the first quarter of fiscal 2002, the marketer posted net income of $15.4 million on revenue of $478.4 million. Direct sales rose 11%, to $198.6 million from $178.3 million. Pottery Barn and Pottery Barn Kids accounted for most of the growth, aided by the year-old West Elm title and the PBTeen catalog, which launched this spring. The Internet accounted for $60.2 million in sales, up 58% from last year.
The skinny: A closer look into Sonoma’s direct-to-customer revenue reveals that catalog sales fell 1%, to $138.4 million from $140.2 million last year.
Sharper Image Earnings Jump 358%
Quarter ended: April 30
The facts: San Francisco-based Sharper Image continues its hot streak. First-quarter revenue for the cataloger/retailer of high-tech gifts increased 27%, to $119.8 million. Catalog sales increased 16%, to $34.3 million from last year’s $29.6 million. Total store sales increased 32%, to $65.8 million; comparable store sales increased 19%. Web sales, which accounted for nearly 15% of total sales during the quarter, increased 42%, to $16.9 million from last year’s $11.9 million. Most impressive, first-quarter net earnings increased 358%, to $682,000 from $149,000 last year.
The skinny: Selling, general, and administrative costs increased 26%, to $28.9 million, and advertising costs increased 27% to $25.6 million.
Penney’s Profit Sinks
Quarter ended: April 26
The facts: In a release, J.C. Penney characterized its most recent quarter as “disappointing.” Net income for the Plano, TX-based general merchandiser tumbled 29%, to $61 million from $86 million last year. Total Penney sales (which include revenue from the Eckerd drugstore chain) fell 3%, to $7.5 billion. Combined department stores and direct sales decreased 7%, to $3.7 billion, from $4.0 billion last year. Breaking it down further, catalog sales decreased 11%. Internet sales, however, increased more than 25%.
The skinny: Selling, general, and administrative expenses increased to 37% from 34% last year.
Deferred Gain of 2001’s Improvements Sale Propels Hanover
Quarter ended: March 29
The facts: Hanover Direct reported net income of $192,000 for the quarter, compared with a net loss of $1.8 million a year ago. But the improvement is due to a $1.9 million deferred gain related to Hanover’s June 2001 sale of the Improvements catalog; without that, the company would once again have been in the red. The Edgewater, NJ-based home decor and apparel marketer, whose titles include Domestications, The Company Store, International Male, Silhouettes, and Gump’s by Mail, reported a 6% decline in net revenue, to $102.5 million. The decrease is due to softness in demand and a 2% reduction in circulation for continuing businesses.
The skinny: C’mon! Though completely legal, for Hanover to continue “booking” portions of the Improvements sale — which happened two years ago — is a bit misleading.
FINANCIAL REPORT
| REVENUE $000 | NET INCOME (LOSS) $000 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 12 months prior | Current quarter | Improvement (decline) | 12 months prior | Current quarter | Improvement (decline) | Info as of quarter ended | P/E (as of 6/20/03) | ||
| CONSUMER CATALOGERS | Blair Corp. | $135,261 | $137,014 | 1% | $5,601 | $500 | (91%) | 3/31/03 | 12.07 |
| Coldwater Creek | 106,241 | 115,204 | 8% | 1,414 | 1,914 | 35% | 5/3/03 | 24.83 | |
| Delia’s | 28,770 | 29,453 | 2% | 11,114 | (7,307) | NM | 5/3/03 | N/A | |
| Geerlings & Wade | 7,364 | 5,037 | (32%) | (740) | (985) | NM | 3/31/03 | N/A | |
| Hanover Direct | 109,511 | 102,474 | (6%) | (1,810) | 192 | NM | 3/29/03 | N/A | |
| J. Jill Group | 73,357 | 82,363 | 12% | 2,696 | 768 | (72%) | 3/29/03 | 19.69 | |
| Lillian Vernon Corp. | 96,091 | 86,712 | (10%) | (4,343) | (3,540) | NM | 2/22/03 | N/A | |
| CATALOGER/RETAILERS | Brookstone | $56,633 | $60,957 | 8% | ($6,519) | ($6,411) | NM | 5/3/03 | 13.11 |
| J.C. Penney Co. | 7,728,000 | 7,493,000 | (3%) | 86,000 | 61,000 | (29%) | 4/26/03 | 14.91 | |
| Jos. A. Bank | 55,760 | 62,272 | 12% | 1,731 | 2,174 | 26% | 5/3/03 | 20.20 | |
| Sharper Image | 94,086 | 119,798 | 27% | 149 | 682 | 358% | 4/30/03 | N/A | |
| Talbots | 391,328 | 394,991 | 1% | 34,983 | 29,400 | (16%) | 5/3/03 | 14.67 | |
| Williams-Sonoma | 478,379 | 536,840 | 12% | 15,353 | 13,395 | (13%) | 5/4/03 | 28.48 | |
| MARKET INDICES | Dow Jones Industrial Average | 21.93 | |||||||
| Standard & Poor’s 500 Index | 29.32 | ||||||||
| Notes: Price-to-earnings ratios are from various sources NM = not meaningful NA = not available |
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| Source: Tully & Holland | |||||||||