Newport News Bucks the Economic Downturn

At a time when most consumer catalogers — particularly apparel mailers — are struggling, value-priced women’s apparel cataloger Newport News is on a roll.

Sales for each month of the year — with the exception of May, which saw sales dip 4% — have increased from the previous year’s: 11% in January, 14% in February, 9% in March, and 3% in April. For its first quarter ended March 31, sales climbed 11%, to $121.4 million, from $109.4 million the previous first quarter. What’s more, Newport News’s sales for 2000, at $479.1 million, were up 17% from the previous year.

Those numbers stand in contrast to those of Newport New’s parent company, the Spiegel Group. Downers Grove, IL-based Spiegel had a net loss of $12.2 million for the first quarter of 2001, compared to earnings of $20.2 million for the first quarter of 2000. The company’s Eddie Bauer apparel catalog/retail division suffered a 4% decline in first-quarter revenue, to $332.9 million from $345.0 million the previous year, while sales from Spiegel’s general merchandise catalog tumbled 9%, to $157.4 million from $173.1 million. For 2000, the Spiegel Group’s total revenue hit $3.72 billion — an increase of 9% the previous year, including Newport News’s 17% growth.

Insiders and outside observers credit several years of aggressive prospecting coupled with an expansion of its product line for Newport News’s success.

Lexington, KY-based catalog consultant Russ Gaitskill, for one, says, “Newport News is extremely well positioned merchandise-wise, promotion-wise, and pricing-wise. The recent economic climate has not hurt the company as much as it has hurt other catalogers because Newport News’s pricing is good; it’s positioned younger, and it’s done well with its proprietary brands.”

Indeed, much of the catalog’s success, says Newport News president/CEO George Ittner, results from two of its private-label brands, ShapeFX and Jeanology. The former apparel line, launched in spring 1999, is designed with figure-forgiving fabrics “to make the body you have look like the body you want,” Ittner says. Jeanology, which was introduced in fall 1997, consists of jeans designed for a variety of figures.

To drive home the figure-flattering aspects of the proprietary brands, the catalog product shots are accompanied by illustrations to guide customers — typically lower- and middle-income women in their 30s and early 40s — to the products most appropriate for their body types. The copy plays up the prescriptive angle as well. For example, the stretch capris claim to “make legs look longer,” while boot-cut pants will “de-emphasize full thighs.”

“The organization and clarity of the product offer and the promotion of its benefit have helped us immeasurably,” Ittner says. In fact, the average order has risen 30% since 1997. “And it’s not just the brands such as ShapeFX and Jeanology — it’s also that we have continuously refined our execution in terms of improved layout, better copy, and certainly stronger and more appealing on-location model photography.”

Newport News has also broadened its merchandise offering in other ways. “In the past four years it has gone from largely a one-season catalog that sells swimwear to a three- or four-season book that sells denim and other apparel for all subsets of its core customer,” says Eric Beder, senior vice president/analyst with New York-based investment bank Ladenburg Thalmann. And this fall, Ittner adds, Newport News plans to introduce a line of casual career clothing.

Then there’s the home goods line, which includes bed linens and decorative accessories. Introduced in 1994, “it has doubled in size in the last two years,” Ittner says, accounting for about 10% of Newport News’s sales.

Peak prospects

The cataloger’s annual circulation, including clearance books, is 250 million, up 41% since 1997. (During the same time period, sales have climbed 52%.) And though Ittner won’t disclose how many of its catalogs mail to prospects vs. buyers, he says that aggressive prospecting has enabled Newport News’s customer file to grow 11% during the past five years as a result. According to SRDS data cards, as of January the cataloger had more than 3.4 million 12-month buyers.

While the economic slowdown and the most recent postal rate hike have led numerous mailers to reduce prospecting, if not their overall circulation, “we’re looking to continue with 2000 levels of prospecting,” Ittner says.

Newport News’s Website, launched in mid-1999, has been another source of new customers. According to a Harris Interactive poll in the Feb. 26 issue of Forbes magazine, the site enjoys an 18.7% visitor-to-buyer conversion rate.

And the sluggish economy may even help Newport News. “I’m sure its customer has felt the pain of the economy,” Beder says. “But Newport News’s price-to-value is very high. Customers are getting this year’s fashions interpreted at good prices, which makes for a compelling catalog.”

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