Catalogers See Good, Bad and the Ugly for Q2

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Catalogers' second-quarter reports produced mixed news early this month as some saw increased earnings while others posted sharply falling profits.


Federated Department Stores, Cincinnati, reported an earnings increase while its catalog business faces a challenging environment. However, profits were down at J.C. Penney Co. Inc., Plano, TX, and the company's catalog sales saw a double-digit percentage drop.


Abercrombie & Fitch, New Albany, OH, posted double-digit increases in net income, net sales, operating income and earnings per share. Lands' End Inc., Dodgeville, WI, recorded improvements in total revenue, sales in its core business and specialty business segments and gross profit, while positive numbers were produced in terms of net income. Hanover Direct Inc., Weehawken, NJ, reported a drop in net revenue while posting net earnings instead of a net loss as it had a year ago.


Federated chief financial officer Karen Hoguet reported that Fingerhut produced sales of $244 million in the second quarter, 37 percent below last year's total.


"The catalog business is going through another tough year," she said. "Bloomingdale's by Mail, which is an established business as opposed to the Macy's catalog, which is really part of the Internet, [is having] a difficult year again."


However, the company's fiscal second-quarter earnings rose 72 percent. The parent of Macy's and Bloomingdale's reported that net income for the quarter, which ended Aug. 4, increased to $110 million, from $63 million last year. Excluding charges related to the closure of the Stern's department stores and its acquisition of the Liberty House chain, the company earned $86 million.


J.C. Penney Co. Inc.'s second-quarter results included a 23.3 percent fall in catalog sales, primarily from the planned delay in the activation of the fall/winter big book as well as weak demand. The delay shifted activation of the book from early June in prior years toward the end of August this year, spokeswoman Stephanie Brown said.


"The rationale was to get it out closer to the selling season," she said.


The department stores and catalog sector produced second-quarter operating profit of $11 million, compared with $74 million last year. The plummeting profits were attributed primarily to weakness in catalog operations and lower department store gross margin ratios. Overall, the company reported that, before the effects of noncomparable items, it suffered a loss of $53 million in the second quarter, compared with a $19 million loss in the year-ago period.


"The decline [in profits] was related to catalogs, which had a loss this year compared with a profit last year," chief financial officer Bob Cavanaugh said during a conference call discussing the results.


Lands' End reported that total revenue for the second fiscal quarter reached $285.8 million, up 4 percent from $275.6 million posted for the same quarter last year. The company's fiscal second quarter ended July 27. Net income for the quarter was $3 million, compared with a net loss of $1.9 million for the prior-year period.


Sales in its core business segment -- represented by the primary monthly, prospecting and tailored clothing catalogs -- rose 6 percent and were led by the co-ed and women's divisions. Gross profit totaled $124.9 million during the quarter, representing 43.7 percent of total revenue, compared with $121.3 million, or 44 percent of total revenue, during the same quarter last year.


Don Hughes, senior vice president and chief financial officer, said fewer overall catalog pages were mailed.


"Our house file continues to strengthen, as we have added about 200,000 names for the first half of the year, up more than 6 percent," he said.


Abercrombie & Fitch reported an 18 percent increase in net income during its second quarter to $25 million, compared with $21.2 million posted in second-quarter 2000.


Net sales for the quarter, which ended Aug. 4, rose 22 percent to $280.1 million, from $229 million recorded during the quarter that ended July 29, 2000. Operating income during the quarter increased 18 percent to $39.9 million, compared with $33.9 million in the second quarter last year.


Hanover Direct reported net revenue of $133.5 million for the second quarter, representing a decrease of $9.9 million, or 6.9 percent, compared with the same period last year, primarily because of the elimination of catalogs at the end of last year. The company reported net earnings of $12.7 million during the second quarter, including a gain of $22.8 million on the sale of the Improvements business and a gain of $1.5 million on the sale of its warehouse in Hanover, PA. The company posted a net loss of $13.7 million during the same period last year.


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