On the heels of mounting losses, multititle mailer Hanover Direct is narrowing its focus. In April the Weehawken, NJ-based cataloger put three of its books on the block: men’s apparel titles International Male and Undergear, and upscale home decor and gifts catalog Gump’s by Mail.
Hanover is also hoping to find a buyer for its San Francisco Gump’s store and its 277,500-sq.-ft. distribution center in Hanover, PA. The company has retained Newmark Retail Financial Advisors to facilitate the sales.
Selling the properties, says Hanover chief financial officer Brian Harriss, frees up the company to focus on its core brands: moderate-price bedding book Domestications, higher-end bedding and decor catalog The Company Store, plus-size women’s apparel mailer Silhouettes, and home improvements title Improvements.
“More than 50% of the home-fashion products buyers are women, so women are a core focus for our overall strategy,” Harriss says. “We believe that International Male and Gump’s, even though they are profitable, could be worth more and thrive better with other owners.”
For instance, Harriss notes that Hanover had no inclination to expand Gump’s retail operation beyond the one San Francisco store. “But we believe other parties out there more seriously focused on retail, given the strength of the Gump’s name and its positioning in the marketplace, might find it an attractive opportunity both for its existing operations and for further expansion in the retail channel.”
According to Michael Petsky, CEO of New York-based mergers and acquisitions firm Petsky Prunier, Hanover’s decision to sell off parts of its stable results from an ability to find a buyer for the entire business. “Now it must sell some of these catalog titles to build its cash position,” Petsky says.
An ongoing restructuring
Hanover’s decision to sell Gump’s, International Male, and Undergear is part of an ongoing strategic realignment plan that began in January, when it replaced CEO Rakesh Kaul with turnaround specialist Tom Shull.
Before the end of 2000, Hanover had announced its decision to fold upscale bedding and accessories catalog Turiya. In January it also shut down its unprofitable Colonial Kitchen and Kitchen & Home catalogs. Then in April, the company suspended publication of the Encore title, which sold premium products from several Hanover catalogs, after only a year and a half. And the cataloger is consolidating its back-end services subsidiary, Erizon (see “Hanover Direct: The Saga Continues,” February issue).
For its fiscal year ended Dec. 30, Hanover reported a net loss of $80.8 million, nearly five times the net loss of $16.3 million for fiscal 1999. Hanover recorded a special charge of $19.1 million to cover costs related to severance, facility exit costs, and fixed-asset write-offs in the wake of the Turiya, Colonial Kitchen, and Kitchen & Home books and the consolidation of back-end facilities.
At first glance, Hanover’s annual net revenue increase of 9.7%, to $603 million from $549.9 million for fiscal 1999, would seem to be good news. But the company had increased its circulation 15% in 2000, to 251 million catalogs.