Top of the Industry, Ma

It would be great to report that some startling new trend or revelation could be seen among the companies that make up this year's Multichannel Merchant 100 (formerly the Catalog Age 100). But there isn't one.

Once again the 10 companies with the greatest annual catalog/Internet revenue are business-to-business merchants, led by the one-two punch of computer giants Dell and IBM. Once again J.C. Penney Co. (#12) is the largest consumer marketer, followed by Sears, Roebuck & Co. (#16). And once again, the number of companies reporting year-over-year sales increases has increased.

In fact, 83 of the companies on this year's list of the 100 largest print and online catalogers saw year-over-year sales growth. That's a 19% increase from the 70 companies on last year's list that enjoyed year-over-year sales growth and a 38% jump from the 60 companies two years ago.

What's more, only 11 of this year's Multichannel Merchant 100 suffered declines in year-over-year sales revenue, compared with 21 of last year's merchants. The remaining six companies had flat sales, as did nine last year.

Among the companies that reversed the previous year's slide in sales, Premier Farnell (#33) benefited in part by growth in the overall electronics marketplace during the first half of 2004, as well as by expanding its product offerings. To attract more business from design engineers, it added 28,000 SKUs to its Newark InOne catalog. Expansion into Canada and Mexico, meanwhile, helped grow sales of Premier's TPC Wire & Cable catalog 10%. All told, Premier Farnell's North American sales rose more than 8%, to $607.5 million. In comparison, in 2003 sales had declined nearly 7%.

As was the case with Premier Farnell, sales at K+K America (#59) reflected growth among the industrial market that makes up much of its audience. In 2003 revenue for the supplier of packaging and industrial safety supplies, warehouse and office furniture, and restaurant and retail equipment declined — albeit less than 1% — to $317.7 million. In 2004 it grew 16%, to $369.2 milllion, with the Hubert (restaurant and retail supplies), C&H (material-handling products), and Canadian and Mexican businesses performing especially well.

The educational products market had been somewhat shaky in 2003, leading to a nearly 2% decline in sales that year for Aristotle Corp. (#100). In 2004, though, the parent company of the Nasco family of educational supplies catalogs grew sales more than 7%, to $175.1 million, thanks largely to what the company in its annual report called “overall stabilization of general national and international economic conditions.”

At apparel cataloger/retailer The Talbots (#75), combined catalog and Internet sales increased 5%, to $243.2 million, after having declined nearly 4% the previous year. Overall sales rose nearly 5% as well, to nearly $1.70 billion, despite some weakness in Talbots' children's and dresses divisions. For the direct division, however, 2004 was the most profitable year to date, which the company credits to improved circulation and a 27% jump in online sales.

Another apparel cataloger/retailer, J. Crew Group (#90), made even more of a comeback. In 2003 its direct sales had plummeted 30%, to $173.5 million, on a nearly 20% cut in circulation. And while some cataloger/retailers, such as Coldwater Creek (#69) and J. Jill Group (#92), saw direct sales decline as their retail and overall revenue grew, such wasn't the case for J. Crew: Its 2003 total revenue had dropped more than 10%, to $688.3 million.

But in 2004, J. Crew showed why its chairman/CEO Mickey Drexler, formerly of The Gap, is known as a turnaround maestro. Direct sales grew nearly 12%, to $193.5 million, despite another 6% cut in catalog circulation. Total revenue increased 17%, to $688.3 million. In the months since Drexler joined the company in 2003, J. Crew Group has focused on strengthening its merchandising and quality control, increasing the number of new styles sold during the second half of the year by 40% last year.

Let's make a deal

Economic stability and internal improvements weren't the sole causes for revenue growth, of course. In what is again hardly a new trend, a number of multichannel companies grew via acquisition.

Newport Corp. (#70), for instance, more than doubled its annual revenue by purchasing a larger company, Spectra-Physics.

Patterson Cos. (#13) has been on something of a buying streak during the past few years. In September 2003 the supplier of dental and veterinary products entered the physical rehabilitation market with its purchase of $220 million AbilityOne Products Corp. It bolstered that unit by acquiring $40 million Medco Supply Co. in May 2004. But Patterson wasn't ignoring its other divisions: It purchased regional veterinary supplier ProVet in April 2004 and Milburn Distributions, a $50 million-plus supplier of equine veterinary supplies, in October 2004, and acquired $9 million CAESY Education Systems, a dental education distributor, in May 2004. The acquisitions contributed mightily to Patterson's 24% rise in revenue, to more than $2.33 billion.

On a smaller scale, Brady Corp. (#64) bought $55 million EMED Co. in May 2004. Brady paid $190 million for the manufacturer/marketer of identification and safety products, which was a key competitor with its own Seton Identification Products division. Brady ended 2004 with estimated direct sales of $350 million, up nearly 17% from the previous year.

The February 2004 purchase of $35 million Monterey Clothing Co. by Crosstown Traders (#46) contributed to the latter's 15% rise in sales, to $460 million. The acquisition added the Monterey Bay and California Style women's apparel titles to the Crosstown Trader stable, which includes Brownstone Studios, Coward Shoes, Lew Magram, and Regalia — a stable that was purchased this year by retailer Charming Shoppes.

Several other companies on the Multichannel Merchant 100 were also scooped up in major acquisitions this year. The $988.8 million School Specialty (#24), which had acquired three smaller companies in 2004, agreed in May 2005 to be bought by Bain Capital Partners for roughly $1.5 billion. Also in May, Neiman Marcus Group (#35), which had sold Chef's Catalog in November 2004, agreed to be acquired by Texas Pacific Group and Warburg Pincus. The investment groups intend to pay $5.1 billion for the $3.7 billion cataloger/retailer. (Texas Pacific, incidentally, is an investor in J. Crew.) The previous month, Cornerstone Brands (#29), the $720 million parent company of Frontgate, Ballard Designs, and Garnet Hill, among other catalogs, was sold to IAC/Interactive Corp. for approximately $760 million.

No doubt those investors are hoping to see the same sort of return enjoyed by Wasserstein & Co. with Bear Creek Corp. (#53). Wasserstein had led a leveraged buyout of the parent company of Harry and David and Jackson & Perkins in June 2004 — and recouped its investment just eight months later.

Where'd they go?

Several perennials appear to have fallen off this year's ranking — but they're actually still here, in disguise.

Take last year's #24, Spiegel Inc. The catalogs that had been part of the one-time general merchandise catalog/retail giant occupy two slots on this year's list. Eddie Bauer Holdings (#64) rose from the remains of bankrupt Spiegel Inc. in June 2005, following its reorganization. Spiegel Inc.'s two other catalogs, Spiegel and Newport News, had been bought by senior management and private equity firm Golden Gate Capital the previous summer; they now form Catalog Holdings Corp. (#39).

Another anonymous-sounding moniker, Direct Holdings Worldwide (#73) is the parent company of Lillian Vernon Corp., last year's #88. ZelnickMedia and Ripplewood Holdings had acquired Vernon in July 2003; five months later they bought Time Life, the music and video direct marketing division of the Time Inc. division of Time Warner. The two direct merchants were combined to form Direct Holdings.

And last year's #43, New England Business Service (NEBS), can be found within Deluxe Corp. (#62), the checks marketer that acquired NEBS in May 2004. Deluxe's $363.2 million in direct sales for 2004 is in fact its revenue from NEBS in the months since the acquisition.

METHODOLOGY

The Multichannel Merchant 100 was compiled by staffers Mark Del Franco, John Fischer, Heather Retzlaff, Margery Weinstein, and Sherry Chiger and freelancer Francine Almash 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. Multichannel Merchant also estimated the mail order and Web sales of multichannel firms that don't report them separately. In some cases, the figures for 2003 differ from those reported last year, due to updated information.

Sales are for the calendar years 2004 and 2003. When a company's fiscal year varied from the calendar year by more than one month, Multichannel Merchant backed out the financial data to obtain calendar-year sales. Whenever possible, revenue figures are net of sales taxes and shipping and handling revenue. For parent companies such as Staples and Sears, the sales figures listed are for their catalog/Internet divisions only. Likewise, for cataloger/retailers such as Williams-Sonoma and Coldwater Creek, sales figures are only for their direct divisions, unless otherwise indicated.