MCM 100: The Major Players

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Considering how rough the economy has been for multichannel marketers this past year, it's no wonder that our annual ranking of the top-100 companies by sales held some surprises. Perhaps the biggest surprise is how many companies continued to do well.

For instance, IT equipment merchant CDW Corp. (#4) turned in a record-setting performance in 2007. The company increased sales 20% to $8.14 billion, compared with $6.78 billion in 2006.

Guitar Center (#52), through its Musician's Friend catalog and Website, also reported a 20% increase in direct sales, from $391.70 million to $470.40 million in 2007.

Not as much of a shock is that some marketers have struggled. Some slipped off the list altogether — see ya, Sharper Image, so long Lillian Vernon. Both merchants suffered falling sales, both filed for Chapter 11 in February, and both were sold a few months later.

The big get bigger

Lillian Vernon, which saw its sales decrease from $171 million in 2006 to $157 million last year, won't be on the list for 2008, either. But that's because the personalized gift merchant was acquired in April by Current USA, so it will appear under Current's parent company Taylor Corp. (#43).

Sharper Image Corp. was acquired in April by a joint venture led by units of private investment firms Hilco Consumer Capital Corp. and Gordon Brothers Group.

The gifts and gadgets merchant's direct sales had slipped from $160.7 million in 2006 to $109 million last year. It's hard to say if Sharper Image will rejoin the ranks of the MCM 100 next year, but the new owners are closing all of the stores and plan to focus exclusively on direct marketing.

Multititle mailer Orchard Brands (#30) made a huge leap, passing the $1 billion mark. That's largely due to its acquisition of venerable apparel and home goods cataloger Blair Corp. in April 2007.

Formerly known as Appleseed's Topco, Orchard Brands is owned by private equity firm Golden Gate Capital, which had a seemingly insatiable appetite for catalog acquisitions during the past few years.

But Golden Gate has slowed down in its buying spree considerably. In fact, one of its last deals was with itself — when Orchard Brands purchased long underwear cataloger WinterSilks from swimwear merchant Venus, which is part of its Spiegel Brands apparel catalog umbrella.

Computer merchants cranking

On the same day in September it bought WinterSilks, Orchard Brands also purchased senior gifts and accessories catalog Gold Violin. Orchard Brands CEO Neale Attenborough told Multichannel Merchant last fall that hard-goods acquisitions are “probably where we'll focus for now.” But the holding company has been quiet this year, and several gifts and hard goods catalogers were on the selling block at bargain prices.

For instance, it was another multititle mailer, Provide Commerce (#70), that stepped up to buy troubled gifts mailer Red Envelope, which had filed for Chapter 11 bankruptcy protection on April 17. At nearly $100 million in sales, Red Envelope never made it onto the MCM 100 on its own.

Provide Commerce, the parent company of ProFlowers, Secret Spoon, Cherry Moon Farms, and Shari's Berries, bought Red Envelope in May. (See “Provide Commerce adds Red Envelope to stable” on page 7.) Provide Commerce itself was acquired in 2005 by Liberty Media, the parent company of the QVC home shopping network.

The computer products segment continues to show serious strength. Computer reseller PC Mall (#27) increased sales 21% in 2007, from 1.0 billion to $1.2 billion. In the fourth quarter alone, PC Mall logged $408 million in sales.

Why is PC Mall doing so well? The company's 21% hike in consumer sales was based in large part on the increased demand for Apple products in the marketplace. And several large contracts won in 2007 helped increase the company's public sector sales by 37%.

Fellow computer reseller Zones (#44) also had a stellar year. Net sales increased 18% to $679.5 million, up from $577.0 million in 2006. And computers and industrial supplies marketer Systemax (#17) grew its sales 19%, from $2.35 billion to $2.78 billion. Computers merchant PC Connection (#19) boosted sales 9%, to $1.79 billion in 2007.

Apparel mailers faltering

Not that all the catalogers selling computer-related wares posted growth. Programming software mailer Wayside Technology (#99) saw its total sales slip from $182.3 million in 2006 to $179.9 million in 2007.

Sales in the company's Programmer's Paradise division decreased by $8.9 million, which Wayside blamed on declining VMware sales, as well as increased competition in the “direct-to-end user” segment of its business.

But Wayside Technology's Lifeboat division grew by 5% in 2007 compared to 2006, thanks to the addition of new lines and increased account penetration.

The women's apparel category is having a tough time. Sales at Limited Brands (#25) fell slightly from $1.42 billion in 2006 to $1.40 billion, although much of that was due to problems with a new distribution center for Victoria's Secret Direct that the company opened in August.

Charming Shoppes (#57), which includes the Crosstown Traders titles such as Brownstone Studios and Lew Magram, also took a tumble. Sales went from $428 million in 2006 to $408 million last year.

The company folded its Regalia title last fall, and also mailed its first 112-page Lane Bryant catalog in late October. That's when Charming Shoppes, which has owned and operated the Lane Bryant stores since 2001, got back the trademark to that catalog title from Redcats USA.

Embroiled in a messy shareholder dispute, Charming Shoppes said in April that it's considering selling off its noncore catalogs to focus on its Lane Bryant, Catherines, and Fashion Bug brands.

Direct sales at Coldwater Creek (#64) slipped from $390 million to $376 million last year. Its grim holiday prompted the merchant to eliminate 65 positions companywide in January.

While Talbots (#55) did show growth in direct sales over 2006, from $385.4 million in 2006 to $427.90 in 2007, the company, which includes J. Jill, has been struggling this year. It's getting out of the men's and children's apparel segments to focus on women's clothing, and Talbots is trying to cut costs by closing stores and layoffs. (For more see “Talbots cuts staff 9%, gets credit” on page 8.)

There were, of course, exceptions. J. Crew Group (#63), which sells men's and kid's apparel in addition to women's, managed to increase direct sales 22%, from $309 million in 2006 to $377 million last year. The company credits “unique product quality and design and innovation on our Website and in our catalog.”

METHODOLOGY

Urban Outfitters (#92) grew its direct sales to $192 million in 2007 from $153.70 million in 2006. In addition to its flagship Urban Outfitters, the company includes the Anthropologie and Free People Brands.

In addition to apparel, Urban Outfitters also sells home goods, a category that has seen a big lift in recent years thanks to the real estate boom. But now that the housing boom has gone bust, merchants that sell home decor and furniture are likely to feel the pinch this year.

It's already happening. Multititle mailer Williams-Sonoma (#21), which includes the numerous Pottery Barn catalogs, posted a 6% gain in direct sales in 2007. But the company's catalog/Internet sales for the first quarter of this year slipped 4.0%.

The Multichannel Merchant 100 was compiled by the Multichannel Merchant editorial staff and freelancer Bernard Schriebl through public records, data card analysis, and input from financial analysts and sources within the industry. To ensure the accuracy of all statistics, Multichannel Merchant tried to contact executives at each company. Some companies declined to confirm sales totals; others did not return messages.

In those cases, or when companies would provide only approximate sales, an asterisk indicates that the figure is an estimate.

Sales are for calendar years 2007 and 2006. When a company's fiscal year varied from the calendar year by more than one month, Multichannel Merchant backed out the data to obtain calendar-year sales.

Whenever possible, sales figures are net of sales taxes and shipping and handling revenue. In some cases, the figures for 2006 differ from those reported last year, reflecting updated information.

For parent companies and cataloger/retailers such as Patterson Cos. and J.C. Penney Co., sales figures are for their direct divisions only, unless otherwise indicated. When companies broke out their telemarketing or field sales revenue from their print and Web catalog sales, we did as well.

To be considered for the Multichannel Merchant 100, a company's print catalog had to account for a significant portion of the business's direct sales, which is why major direct marketers such as eBay and Insight are not on the list.