For more than 100 years, cataloging has been an upstart business. But by 2001, look for the big boys to be taking over. And as you’d expect, the people who’ll be leading this bigger, grown-up industry won’t be kids with hot ideas just out of business school. By and large, they’ll be experienced, seasoned executives with a common quest: to build big companies, carefully but aggressively, one solid catalog at a time.
Among those listed here, few are gamblers. Almost all are acquisition-minded and old hands, having led, built, or rescued other catalogs. And all have strong, optimistic growth goals.
In fact, most of these names are pretty familiar. They’re proven not only at surviving a tougher catalog industry, but at thriving as well. “The number of catalogs that make it from one year to the next, and continue to grow, are clearly in the distinct minority,” says David Leibowitz, managing director of Burnham Securities. Well, if this bunch doesn’t make it, maybe nobody can. The year 2001 is only three years away, but as Leibowitz points out, “three years is an awfully long time” in the catalog world. Stay tuned.
THE ONE TO BEAT
Dennis Pence, cofounder/CEO, Coldwater Creek
Company founded: 1984. Publicly traded since 1997.
Catalogs: gifts and apparel book Northcountry, apparel titles Spirit of the West and Milepost Four, linens book Bed & Bath
Key manager: Ann Pence, creative director
1997 sales: $246.7 million
1997 earnings: $11.7 million
1996 sales: $143 million
1996 earnings: $5.9 million
Growth rate: 66% annually since 1992
House file: 1.65 million 12-month buyers
Track record: American dream. Dennis Pence was a national marketing manager for Sony, Ann Pence a freelance ad copywriter when they decided to chuck it all and move to Sandpoint, ID.
Why a leader: In a tough, oversold casual apparel market, Pence managed to give serious chase to L.L. Bean and Lands’ End. To raise capital, Pence could have sold the company. Instead, he bet on himself, going public and making a killing.
What they say: “I think the catalog is a real star.”-consultant Don Libey
“Ultimately, by segmenting its customer file and seeing product opportunity, Pence has created a tremendously successful catalog.”-Craig Battle, managing director, Tucker Capital
Prospects: Although Coldwater stumbled a bit this spring, most believe that in timing, marketing, and product selection, Pence has struck gold.
THE (YOUNG) OLD HAND
Mike Smith, president/CEO, Lands’ End
CEO since: 1994
Company founded: 1963. Publicly traded since 1986.
Catalogs: apparel catalogs Lands’ End, Kids, Beyond Buttondowns (tailored men’s clothing), First Person Singular (tailored women’s clothing), and Willis & Geiger (adventure wear); linens book Coming Home
Key managers: Gary Comer, founder/chairman; Bradley Johnson, chief financial officer; Chip Orum, chief operating officer; Mary Nordloh, creative director; Francis Schaecher, senior vice president, operations; William Ferry, vice chairman, sales
1997 sales: $1.26 billion
1997 earnings: $64.2 million
1996 sales: $1.12 billion
1996 earnings: $51 million
Growth rate: Sales up 9% during Smith’s watch; earnings up 21%
House file: 9.6 million 36-month buyers
Track record: Smith, just 37, had already spent 14 years at Lands’ End and led the successful Coming Home launch before being appointed to top post.
Why a leader: Nobody does it better than Lands’ End. Under Smith’s leadership, the catalog has continued its innovative marketing strategies and strong intuition for product, which is all layered over enormous brand equity. The cataloger is now opening up serious overseas potential in Japan, the U.K., and Germany.
What they say: “Everyone will still be chasing Lands’ End in 2001. It is very, very strong and will be getting stronger. The children’s book started at zip and right now is a category killer. The company plans extremely well: It does five-year plans and gets through them in four years.”-AnonymousP rospects: Lands’ End is continually surprising in its marketing prowess. If Smith keeps the cataloger on course, it will likely only get stronger.
|THE BUDDING BUILDER|
Bob Ostertag, CEO, Foster & Gallagher
CEO since: 1996 (handpicked by the company cofounder Tom Foster, who died in 1996)
Company founded: 1952, by Foster and Helen Gallagher
Catalogs: 20, including flower and plant books Michigan Bulb, Spring Hill Nurseries, Breck’s, and Stark Brothers (fruit trees); food gifts catalogs Popcorn Factory and Mauna Loa (macadamia nuts); children’s products books Childcraft, Learn & Play, HearthSong, and Magic Cabin Dolls; and home and gift catalogs Home Marketplace, Personal Comforts, and Walter Drake
Key managers: Bob Pellegrino, vice chairman; Mel Regal, chairman; Jon Elletson, chief financial officer
1997 sales: $480 million
Current earnings: “highly profitable,” according to Ostertag
1996 sales: $376 million
Growth rate: 125% over past four years
Expected sales for 2001: $1 billion-plus, through growth, acquisitions, and new business
House file: more than 5 million
Track record: Ostertag’s long resume includes stints as chief operating officer of Childcraft, chief administrative director of multititle mailer Hanover Direct, and corporate controller of mail order firm Gardenway.
Why a leader: Turned around moribund Michigan Bulb when hired as catalog president in 1992. Then organized Foster & Gallagher into five business groups: Michigan Bulb, Spring Hill, Children’s, Gift, and Corporate Business Services. Magic business touch in improving fulfillment and marketing translated into higher profits and stronger platform companywide, setting stage for acquisitions and new catalog initiatives.
What they say: “Ostertag has worked miracles. Michigan Bulb was a borderline company, and he turned that around so quickly it amazed us. He has done a good job of organizing the whole company so that it’s had a tremendous increase in profits and sales. I don’t know anyone who has done so much to a leading company to increase its profitability and sales volume.”-consultant Dick Hodgson, who also sits on F&G’s board
“Foster & Gallagher continues to thrive. It will remain very profitable and will make carefully thought- through acquisitions and may by 2001 have gone public.”-consultant John Lenser
Prospects: Under Ostertag, solid, diversified company could prove good home to undermanaged acquisitions. Ostertag is less publicity-shy than the late Foster: Can you spell IPO?
|THE CONSOLIDATOR KINGS|
Don Steiner (below left), founder, and Bill End (below right), chairman/CEO, The International Cornerstone Group
Company founded: 1993
Catalogs: Travelsmith (travel accessories); Frontgate, Ballard Designs, and Whispering Pines (home accessories and furnishings); The Territory Ahead (apparel); and Garnet Hill (natural fibers products)
Key managers: Mark Fasold, chief financial officer; John O’Steen, president, fulfillment, database and operations; Paul Targen, president/CEO, Frontgate
1997 sales: $200 million-plus
1997 earnings: “Nicely profitable, at or above industry standards,” Steiner claims.
1996 sales: Less than $100 million (Travelsmith and Frontgate only)
Growth rate: Besides growth through acquisitions, each catalog is growing 25%-50% annually
Expected sales in 2001: By some industry estimates, $1 billion-plus including potential acquisitions
House file: 3.5 million active buyers
Track record: Distinction galore. End, who came on in 1995, had been CEO of Lands’ End and marketing chief at L.L. Bean; Steiner spent 12 years at Boston Capital Ventures, managing $100 million in assets.
Why leaders: As heads of the premier consolidation group with a brief, impressive history of buying quality brands with complementary customer databases and growth potential, Steiner and End make sure that Cornerstone adds the right amount of value (economies of scale in operations and database) while keeping hands off management. In short, these guys have goodeyes and deep pockets, and if it ain’t broke, they don’t fix it.What they say: Thanks to its key leaders, “Cornerstone is positioned very, very well with very strong properties. It would be right up there with the best.”-Lenser
“It has a collection of some of the best brand names, and I think brand names are going to be increasingly important.”-Battle
“It has six good companies, significant in size and with complementary databases and excellent management. Cornerstone will be the king of consolidators.”-Bill Nicolai, senior vice president, marketing, The Good Catalog Co.
Prospects: With a recent $60 million equity infusion and proven ability to spend money wisely, these are the guys to watch and emulate.
|THE GIFTS & GAMES GURU|
Coy Clement, CEO, The Paragon
CEO since: January 1997
Company founded: 1971
Catalogs: gifts catalog The Paragon and puzzles catalog Bits & Pieces (acquired at the end of 1997)
Key manager: Stephen Rowley, president
1997 sales: approaching $60 million
1997 earnings: n/a
1996 sales: about $40 million
Growth rate: 50% on Clement’s brief watch
Expected sales for 2001: $150 million-$200 million
House file: 1 million 12-month buyers
Track record: Clement’s long career includes stints as marketing director of kits cataloger Heathkit, vice president of furniture catalog Yield House and outdoor apparel mailer Eddie Bauer, and president of tool and kits catalog Leichtung Workshops. Launched Improvements home products catalog; helped turn Bauer from Bean clone to casual clothing marketer.
Why a leader: Clement, in one year, has shown he knows how to expand a catalog franchise-fast. Now, using The Paragon as a platform, he is encouraging acquisitions and new business opportunities.
What they say: Clement, who convinced investment group Wand Partners to buy The Paragon with him, “understands the dynamics of the catalog business, and the add-on acquisitions [that are planned] will capitalize on The Paragon’s very, very efficient fulfillment and distribution and customer service. The investors understand the key to business is excellent management, and they’ve been bringing in excellent managers. The Paragon is a company you’ll see branch out.”-Battle
Prospects: Clement has shown that he knows how to grow a variety of new businesses. No reason he can’t do the same here.
|THE MAKEOVER MAN|
Gordon Cooke, president/CEO, DM Management
CEO since: 1996
Company founded: 1987. Publicly traded since 1993.
Catalogs: women’s apparel titles J. Jill and Nicole Summers
Key managers: John Hayes, executive vice president; Olga Conley, chief financial officer
1997 sales: $135.5 million
1997 earnings: $6.4 million
1996 sales: $84.6 million
1996 earnings: $2.3 million
Growth rate: 60% sales, 100% EBIT
House file: J. Jill: 505,000 12-month buyers (up 192% from year earlier); Nicole Summers: 325,000 12-month buyers (up 5% from year earlier)
Track record: Prior to DM Management, Cooke turned Bloomingdale’s by Mail into a premier apparel cataloger.
Why a leader: After wheezing losses in 1995, DM Management-in Cooke’s hands-turned sharply around with a distinctive, focused merchandise offering and product presentation. Customer segmentation and aggressive prospecting have made the catalogs major contenders in women’s apparel.
What they say: “Gordon Cooke thinks outside of the box. I think the company will continue to do well.”-Tony White, president, co-op database Abacus Direct
Prospects: Cooke has an instinct for branding and merchandising, backed up with Hayes’s solid numbers management. Still no sales plateau in sight.
|THE COMEBACK KID|
Rakesh Kaul, CEO, Hanover Direct
CEO since: 1996
Company founded: 1950. Publicly traded since 1991.
Catalogs: linens titles Domestications and The Company Store; home products books Improvements, Kitchen and Home, The Safety Zone, and Colonial Garden Kitchens; gifts and home furnishings book Gump’s; apparel catalogs Austad’s, International Male, Undergear, Tweeds, and Silhouettes
1997 sales: $558 million.
1997 losses: $11 million. Made $4.8 million profit on $171.6 million in sales in last quarter of fiscal ’97-Hanover’s first profit in three years.
1996 sales: $700 million
1996 losses: $105 million
Growth rate: “Starting in the second half of 1998, we’re targeting double-digit growth in our core businesses.”
Expected sales in 2001: $800 million-$1 billion
House file: 5.5 million 12-month buyers
Track record: Prior to Hanover, Kaul helped engineer turnarounds at vitamin company Shaklee and general merchandise cataloger Fingerhut.
Why a leader: Squeezed a profit out of wretched Hanover after the company had laid down to die. Harsh cutbacks in circulation and staffing finally stemmed the red ink; improved marketing, merchandising, and fulfillment seems to be taking hold. Stock price has more than tripled, from less than $1 in ’96 to $3.25 this spring (high was $18 in 1994).
What they say: If Kaul keeps up the good work for the next three years, by 2001, “Hanover will have pulled out of the slump it’s in by continuing to fine-tune. Its profits will have gone positive. It has narrowed the loss considerably, and I think it still has more work to do, but it’s going in the right direction.”-Lenser
“Rakesh has really gotten a handle on the business. It’s made a big comeback. That’s one that was brought back from the dead.”-White
Prospects: Kaul has proven ability in turning around low-end businesses. The uptick will likely continue-but for how long?
|THE GLOBE TROTTER|
Irwin Helford, CEO/chairman, Viking Office Products
CEO since: 1983
Company founded: 1960. Publicly traded since 1990.
Key manager: Bruce Nelson, president/ chief operating officer
Catalogs: 157 in the U.S. and 10 other countries, mostly in Europe and Australia. Categories include basic office supplies, computer supplies, office furniture, custom printing, and warehouse, janitorial, and sanitation products.
1997 sales: approximately $1.5 billion ($1 billion in international sales)
1997 earnings: roughly $70.1 million
Fiscal 1996 sales: $1.2 billion
Fiscal 1996 earnings: $62 million
Growth rate: 165% since 1994
House file: 2.6 million 12-month buyers
Track record: 100% office products guru. Developed catalogs for Reliable Stationery Co. before heading over to Viking as president.
Why a leader: Helford oversaw the company’s surge from zero to $1 billion in international business since the first venture in England in 1990. The cataloger retains customers not on price but on “fanatical” service: virtually no backorders on 10,000 items, and free overnight shipping in every country it operates. In U.S., customers in 19 major cities get free same-day delivery.
What they say: “Viking is way above them all in international circles.”-consultant Jack Schmid
“It has the formula down for moving into overseas markets. It looks at every market on its own merits, and it doesn’t have a cookie-cutter approach. It has economies of scale in terms of buying in bulk; it’s identified what each market wants, and that’s what it sells. Its horizons are pretty much unlimited.”-White
Prospects: Helford has perfectly positioned Viking for global business and e-commerce. The firm also subscribes to “customer first” marketing, resulting in huge repeat buying rate. Says Helford: “If the retention number is right, the financial reports take care of themselves.”
Peter J. Canzone, CEO/chairman, Brylane
CEO since: 1978.
Founded: as Lane Bryant, 1904. Publicly traded since February 1997.
Catalogs: larger-size apparel catalogs Lane Bryant, Roaman’s, Jessica London, and King Size for Men; regular-size apparel titles Chadwick’s of Boston, Lerner, Bridgewater, and Sue Brett; launching Gramercy Home in September.
1997 sales: $1.3 billion
1997 earnings: $54.7 million
1996 sales: $1.2 billion
1996 earnings: $37.9 million
Growth rate: Specialty-size books growing annually in low double digits; regular-size catalogs growing in mid double digits.
House file: 12 million 12-month buyers
Track record: Canzone has spent 29 years at Brylane, starting as divisional vice president of Lane Bryant in 1969. Prior to that, he’d been with general merchants Spiegel and J.C. Penney
Why a leader: Over the past few years, Canzone executed a successful leveraged buyout from The Limited (1993), blasted into the public market (earnings per share up nearly 50% its first year), and turned a specialty-size apparel house into a sturdy platform for startups and acquisitions. By acquiring Chadwick’s of Boston late in 1996, Brylane has become a major player in “regular” apparel sizes. Currently just 38% of its business comes from its larger-size books.
What they say:”Right now, it’s definitely considered a happening company.”-John Hayes, executive vice president, DM Management
Prospects: Canzone’s surehanded management has made every Brylane book an earnings winner. Now with 40% of its stock owned by $18 billion French retail/catalog conglomerate Pinault Printemps-Redoute, Brylane has rosy international horizons as well.
|THE YOUNG GUN|
Stephen Kahn, cofounder/president/CEO, Delia’s
Company founded: 1993. Publicly traded since 1996.
Key managers: Christopher Edgar, cofounder/chief operating officer; Evan Guillemin, chief financial officer
Catalogs: teen girls’ apparel book Delia’s, home accessories title Delia’s Contents, soccer catalog TSI Soccer
1997 sales: $113 million
1997 earnings: $4.4 million
1996 sales: $54 million
1996 earnings: $2.2 million
House file: 1.3 million
Track record: Youngsters all (just 31 years old), the cofounders had been investment analysts before hitting on the Delia’s idea in their mid-20s.
Why a leader: Delia’s is the one catalog company that seems to know what Generation Next wants. Among junior high girls, Delia’s has as much squeal appeal as Leonardo DiCaprio. Almost.
What they say: “I was the guy who pooh-poohed Delia’s, but it has to be regarded as the most notable startup in past five years. And I think it will develop a family of catalogs toward Generation Y, which is a good market. Generation Y’s folks haven’t cut them off yet, so they have access to money, and they’re undermarketed.”-Bill Nicolai, The Good Catalog Co.
“Delia’s was able to say, ‘There’s this big market of girls and nobody’s marketing to them.’ That it pulled that off to the degree it has shows that it will be really successful and think ahead.”-consultant Katie Muldoon
Prospects: Biggest Generation Y list in the business, thanks to acquiring TSI Soccer in 1997. If any catalog can get kids to shop mail order, this one can.
|THE OLD RELIABLES|
Williams-Sonoma (includes home furnishings cataloger/retailers Pottery Barn and Hold Everything as well as namesake kitchenware cataloger/retailer)
Still the best at balancing profitable, quality-oriented retail and cataloging. It’s the company to emulate as more and more retailers-such as Esprit and Banana Republic-revive their direct mail efforts in order to keep the revenue growth ticking.
Bear Creek Corp. (food catalog Harry and David, roses catalog Jackson & Perkins, gifts book Northwest Express)
CEO Bill Williams has brought in seasoned senior managers, significant public relations efforts, and invested $50 million or so in capital improvements. That means the king of food catalogers, at $325 million in sales, has big plans to get even bigger-particularly in retail and in nonfood categories.
|THE WILD CARDS|
SPIEGEL: Having staggered under recent losses ($33 million last year, on sales of $3.18 billion), the general merchandiser nevertheless appears to have an asset in Eddie Bauer, which has 503 stores and $1.5 billion in catalog and retail sales. But with the president’s office taken over by three executives (Mike Moran, general counsel; Harold Dahlstrand, chairperson/chief human resources officer; and James W. Sievers, chief financial officer), who’s got the vision for the future?
Predictions: “It drags along, and I don’t which way that thing could go.”-consultant John Lenser
“Unless it does something awfully foolish, it’s got an awful lot of financial resources, and it should be able to get itself out of its current slump.”-Tony White, Abacus
GENESIS DIRECT: This consolidation upstart believes in buying and starting smallish catalogs-mostly in sports licensing-in hopes of bringing them enough economies of scale to get them profitable. So far, according to sources, it’s been losing approximately $1.50 for every dollar it takes in. But the company is still new (founded less than two years ago, it had anticipated losing money), and point man Warren Struhl has been able to get some big investors believing in his dream. Now it’s attempting to raise money in the public market as well.
Predictions: “I don’t totally understand the model, though I have the utmost respect for them….Struhl has gotten a lot of big hitters to buy into it. I wouldn’t bet against him.”-Craig Battle, Tucker Capital
“It either will be licking its wounds or will have downsized considerably.”-Anonymous
AMAZON.COM: The first and biggest household name Web marketer. Great concept (any book you want, and click! you’ve got it), lots of admirers, cute commercials. Just one problem: It still doesn’t make money. And to some observers, the economics of the business suggest that it may never make money.
Predictions: “Sooner or later, stockholders will realize they’re holding $2 billion in securities and it’s nothing but a smoking hole. Fifty-eight percent of customers are repeat buyers, and even so there’s not enough margin to ever operate the company profitably.”-Anonymous
“No doubt, Amazon is breaking ground. [By allowing customers to interact], it’s getting people to recognize that [catalogers] can give them more informationabout themselves than they could have gotten without having had that contact. It’s intimacy economics, and I see that happening [more] in the direct business.”-futurist Watts Wacker-DC
Diane Cyr is a freelance writer based in Los Angeles.