Consumer Merchants See Slower Recovery

Nov 01, 2010 9:30 PM  By

While the Business-to-Business and Computers Merchants Celebrated a Super Second Quarter, their consumer counterparts did not fare quite as well.

Only three of the eight publicly traded consumer merchants tracked by Multichannel Merchant registered revenue gains. But on a positive note, all three recorded double-digit revenue gains.

What’s more, seven companies saw improvements in bottom line earnings compared to the same period last year. This indicates that the companies are better able to forecast with accuracy and prepare for slow consumer spending periods, says Stuart Rose, managing director for Tully & Holland, the Wellesley, MA-based investment bank that tracks marketers for Multichannel Merchant. Still, three of the profiled companies — 1-800-Flowers.com, Delia’s, and Gaiam — reported a net loss for the quarter.

The big winner for the quarter was Williams-Sonoma, which led the way with 15% revenue growth, followed by Coldwater Creek at 13% and Jos. A. Bank at 12%.

Williams-Sonoma recorded impressive numbers in the quarter, reaching $776 million in sales and 15% year-over-year growth. Net income was $30.8 million, way up from $399,000 in the second quarter last year.

Rose points to Williams-Sonoma’s strategy of merchandising at price points that appeal to value-seeking consumers. The kitchen and home products retailer has had success in attracting new customers to its brands with targeted marketing campaigns.

Conversely, Gaiam seems to be feeling the effects of a turbulent economy. The health and wellness merchant’s second-quarter sales suffered from reductions in catalog circulation, though it made some improvements in operating efficiency and forecasting and remained lean, Rose says.

Gaiam’s revenue was down nearly 7%, to $56.4 million, and it reported a net loss of $0.5 million. With new content and product planned for the third and fourth quarters, Gaiam could see a boost in its top-line revenue, Rose believes. “But noticeable improvement will not occur until consumer spending and confidence improve.”

Delia’s is an example of a b-to-c company struggling to keep pace in a depressed economy, Rose says. The teen girls apparel merchant’s second quarter results, including a 14.5% drop in direct sales, “did not indicate any convincing signs of improvement in the near future,” he notes. Weak store traffic hurt top-line revenue, and back-to-school business showed only glimpses of hope in stores that historically have shown early back-to-school surges, Rose says. “Delia’s did not appear to make any improvements in operating efficiency and has not been able to keep costs under control.”

Top-line improvements needed

The shaky results of the segment during the second quarter further solidify concerns of a double-dip recession, Rose says. “The only consolation lies in the ability of these companies to forecast, remain lean and squeeze every possible penny from marginal sales down to the bottom line.”

While it’s encouraging that we’ve now seen four consecutive quarters of year-over-year GDP growth, Rose says, “we will not see a considerable turnaround until b-to-c companies can achieve top-line revenue improvements.”