Profit picture: up and down

Aug 01, 1998 9:30 PM  By

Anumber of direct mailers showed huge fluctuations in first-quarter earnings, both up (Delia’s, Blair) and down (Damark, CML Group).

Of the 26 publicly traded catalogers and cataloger/retailers tracked by Catalog Age, 16-or 62%-showed an improvement in their bottom line. New York-based Delia’s, whose flagship catalog sells apparel and accessories for teenage girls, reported a monster 521% increase in net income, to $2 million from $322,000 for first-quarter 1997, outpacing its 76% leap in sales. Delia’s added 200,000 buyers in the quarter and received 400,000 catalog requests.

“It was another record quarter,” says Stephen Kahn, president of Delia’s. “Our growth underlines the strength of our database and our knowledge of the customer. We think we are well on the way to leveraging the Delia’s brand and emerging into the young men’s side of the business” following the company’s December 1997 acquisition of sports equipment cataloger TSI Soccer.

Apparel and home products mailer Blair Corp. also showed dramatic income growth. The Warren, PA-based company reported a modest 4% revenue increase but posted a 181% jump in profits, to $5.5 million. In its quarterly report, the company noted that gross revenue per advertising dollar had increased nearly 10%, indicating improved mailing strategies.

Now the bad news…. Four of the nine cataloger/retailers had little to celebrate at quarter’s end. For instance, Damark, the Minneapolis-based cataloger of home goods and electronics, grew sales 5%, to $135.1 million, but its income dropped 66%. The company blamed this drop largely on “softness in response” to the members-only catalogs, which are typically more profitable than its general mailings.

“I’ve seen sporadic instances this spring of companies reporting soft response rates and lower average orders despite a healthy economy and record consumer confidence levels,” says Nick Holland, of Boston-based investment banking firm Ulin & Holland. “It’s puzzling.”

The CML Group, the parent company of gardening accessories cataloger/retailer Smith & Hawken, continued its downhill slide. While Smith & Hawken reported a 13% jump in sales, its sister company, exercise equipment manufacturer/marketer NordicTrack, drained the parent. Overall, CML reported a first-quarter loss of $43.7 million, 408% steeper than last year.

To stem the flow of red ink, CML closed its NordicTrack direct sales division earlier this year to focus on retail. In a press release, the company also indicated that it might soon announce a sale or other strategic change concerning Smith & Hawken and/or NordicTrack.