Third quarter’s not the charm

All but one of the publicly traded consumer merchants tracked by Multichannel Merchant increased their third-quarter sales in 2006. On the other side of the ledger, however, the results were less than dazzling: Only six of the 11 companies managed to boost their new income or shrink their net loss.

“Direct marketers continued to pour on sales during the back-to-school quarter,” notes Stuart Rose, managing director for Wellesley Hills, MA-based investment bank Tully & Holland, which tracks the companies for Multichannel Merchant. “It is interesting that the gift companies — 1-800-Flowers.com and RedEnvelope — are not profitable during this time period, even with double-digit sales growth. It just goes to show how much of a trough they are in during this low-gift-giving sales period.”

Bad time for Blair

Quarter ended: Sept. 30 The facts: Net sales for Warren, PA-based apparel and home decor merchant Blair Corp. fell 16%, to $91.1 million from $108.3 million or the third quarter of 2005. What’s more, the company sank into the red, reporting a net loss of more than $1.1 million, a turnaround from the net income of $1.4 million it had posted the previous third quarter. Blair officials attribute the subpar performance to “higher-than-normal sales of products at lower price points and corresponding margins.” But Rose feels it’s more a matter of “the higher-priced merchandise didn’t sell, and the lower-priced merchandise didn’t sell enough to compensate for its lower prices.” Blair’s perceived quality and perceived value were not as strong as last year, Rose says. “This sounds like poor merchandising.” The skinny: Many industry observers feel that, given Blair’s recent performance, its decision to agree to be acquired by a division of Golden Gate Capital (see page 7) is a wise one.

Robust results for Delia’s

Quarter ended: Oct. 28 The facts: Third-quarter sales at New York-based Delia’s increased 12%, to $67.5 million from $60.3 million for the same three-month period in 2005. The multititle merchant’s net income nearly doubled, to $3.3 million from $1.7 million. Sales for the direct segment — the Delia’s and Alloy teen girls’ clothing catalogs and Websites and the catalog and Website of extreme-sports gear merchant CCS — rose nearly 5%, to $41.7 million from $39.9 million the previous third quarter. Income from operations in the direct segment soared 67%, to $3.5 million from $2.1 million. Gross profit in the direct segment was 47.4% of net sales for the quarter, an increase of 120 basis points. Sales from the Delia’s stores increased 26%, to $25.9 million from $20.5 million a year ago, due to the addition of 11 stores; same-store sales were up 5%. The skinny: Although lower-margin retail sales are accounting for a greater portion of Delia’s revenue, the company nonetheless managed to increase its overall gross margin by 120 basis points. “The company is adding fixed-overhead costs, primarily due to being a stand-alone public company,” Rose adds, “which will continue to temper strong operating performance.”

Gaiam in good fiscal health

Quarter ended: Sept. 30 The facts: Third-quarter sales for the Broomfield, CO-based manufacturer/marketer of “healthy living” products rocketed up 72%, to $51.8 million from $30.1 million for the third quarter of 2005. The increase was due to internal growth in the business-to-business and direct-to-consumer segments and to contributions from the media titles acquired from GoodTimes Entertainment in September 2005. What’s more, net income soared 227%, to nearly $1.7 million from $505,000 12 months prior. Gaiam’s cash position of $105 million on Sept. 30 was a marked improvement from $15 million on Dec. 31, 2005, primarily reflecting proceeds from the completion of its secondary offering of common stock in May and improving operating cash flow. The skinny: Despite the increase in sales, operating income declined from 2.9% of sales to 2.0% of sales as expense ratios grew faster than gross margin increases. In terms of dollars, operating income increased 11%.

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.