The third-quarter blues

Of the 23 consumer catalogers and cataloger/retailers tracked by Catalog Age, 15-or 65%-reported either a drop in third-quarter income or a net loss for the quarter. This is a significant increase from 1997’s third quarter, when 46% of consumer catalogers and cataloger/retailers reported losses or income declines.

For some catalogers, the red ink reflects one-time charges. Minnetonka, MN-based general merchandiser Fingerhut Cos., for instance, lost $15.1 million for the quarter after reporting $23.8 million in after-tax nonrecurring charges, such as the write-off of unused space in its Utah distribution center and a $7.1 million charge related to debt retirement.

“We’ve seen a lot of financial housecleaning among catalogers during the third quarter, and that’s been common over the past few years,” says Nick Holland, managing director of Boston-based investment firm Ulin & Holland. “To the extent that the publicly traded companies have to control their reporting of losses, it’s better to have these charges flow through a weak quarter, such as the third quarter, than to have them spoil a profitable quarter, such as the fourth quarter.”

Lands’ End’s $3.4 million after-tax charge “in unrealized losses resulting from the strengthening of the yen against the U.S. dollar” accounted for some of its 96% plunge in third-quarter income, to $347,000 from $8.2 million last year. But weak outerwear sales resulting from the unseasonably mild fall that hit much of the country and lackluster interest in apparel overall (see “Apparel in peril,” page 5) also hurt the Dodgeville, WI-based cataloger. Revenue rose less than 2%, to $322.4 million, despite increased mailings.

Likewise, sales growth fell short of circulation increases at Rye, NY-based Lillian Vernon. Although the gift cataloger boosted circulation 16%, sales rose less than 6%, to $39.4 million. The result: Lillian Vernon’s third-quarter net loss (exacerbated by increased printing and mailing costs) soared 401%, to $1.9 million.

What losses? But the quarter was not without its success stories. Wine and spirits cataloger Geerlings & Wade, for one, had reason to crack open the bubbly. Although third-quarter revenue fell 3%, to $7.0 million, the Canton, MA-based company increased net income 91%, to $220,000. President/CEO Jay Essa attributes the gains to “higher margins and better efficiencies, such as cutting down on our marketing and operational costs.”

And housewares cataloger/retailer Williams-Sonoma enjoyed a 54% leap in net income, to nearly $5.0 million. While overall revenue for the San Francisco-based company, which includes cataloger/retailers Pottery Barn and Hold Everything, rose 18%, to $241.3 million, catalog sales climbed 20%, to $88.1 million, on a circulation increase of less than 4%.

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