Geerlings & Wade seemed to be starting the year on a sour note. The wine marketer’s first-quarter sales of $8.2 million were down 3.5% from the first quarter of ’99. Meanwhile, the net loss had jumped 46%, to $413,000, or $0.11 loss per share. But president/chief financial officer David Pearce blames the disappointing figures on several one-time events that, he insists, will ultimately produce profits and sales gains.
For starters, the $36.8 million company’s decision to shorten the amortization period – from five months to three months – on the expense of acquiring new customers raised expenses overall in the first quarter and made it difficult to accurately compare performance with last year. At the same time, the company ran into problems while converting its hardware and software systems. The snafus resulted in a number of names (Pearce would not specify how many, or if they were house file names) being excluded from mailings until the problem was rectified in February – hence the sales downturn.
Then there were expenses related to the failed merger with Liquid Holdings Co., which was terminated on Feb. 22 when the company was unable to obtain the money by the deadline set by Geerlings & Wade. And the wine seller had distribution problems last fall, when UPS stopped delivering alcohol in some states, such as Florida and Connecticut.
But Pearce maintains that the first quarter’s poor showing was an aberration. Now that its computer system is running smoothly, Geerlings & Wade plans to mail deeper into its house file as well as increasing the acquisition mailings further. And the mailer has been able to find parcel carriers that will transport alcohol to all the states in which Geerlings & Wade do business.
Geerlings & Wade is also betting on the Web. With first-quarter sales of just more than $1 million, the Internet accounts for roughly 12.5% of total revenue. But the average online order is larger than the company’s average print-catalog order, Pearce notes.
Pearce hopes to soon reap the benefits of a real-time link between the company’s inventory and its two sites, Geerwade.com and WineBins.com. What’s more, he says, “e-mail marketing to existing customers will cut costs, so we will be testing to see if it is viable to cut traditional mailers to our regular Website customers.”