DELIA*s Stock Begins Recovery

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DELIA*s Corp. stock has been climbing from its 52-week low of 50 cents on Nov. 24 since it announced plans in December to sell its peripheral Internet properties to focus on its core-branded business.


DELIA*s core business includes the dELIA*s catalog, dELIAs.com, and dELIA*s retail stores. DELIA*s markets moderately priced apparel, accessories and home furnishings to females age 13 to 24, with a focus on upper- to middle-class teen-agers.


DELIA*s non-core Internet and offline properties include SparkNotes.com, a community site providing online book reviews and study guides written by students and recent graduates; gURL.com, a teen girl community site; SparkMatch.com, an online meeting site; TheSpark.com, a community site; TSI Soccer Corp., an online and offline soccer equipment catalog; and Storybook Heirlooms, an apparel catalog targeted to girls age 8 and older.


The company took its first steps to eliminate peripheral businesses with the sale of TSI Soccer Corp. in January to Sports Endeavors Inc., publisher of the Eurosport soccer catalog. Two days later, DELIA*s tentatively agreed to sell SparkNotes.com to Barnes & Noble Inc. The company plans to divest itself of the remaining community properties and peripheral catalogs by July with the exception of Storybook Heirlooms, for which a sale date has not been determined yet.


"We want to build DELIA*s branded business and return to profitability," said Steven Kahn, CEO of DELIA*s. He added that while all parts of the branded business are profitable, the peripheral online initiatives have not been.


"Our focus is to be a multichannel retailer of our own branded products," he said. "We are moving out of the media and community site business."


DELIA*s is also looking to expand its retail presence, which was launched in mid-1999. "The majority of teen spending occurs in malls," Kahn said. "Currently our retail business is about half the size of the direct business. Over the next two years we are looking to build it up to be the same size as direct."


The company operates 31 retail stores and four outlets.


DELIA*s direct catalog has an internal database of roughly 13 million names, with about 6 million active buyers. The company lists local retail centers in the catalogs and promotes the stores on the Web site in order to leverage the direct base for retail rollout, Kahn said. The Web site has more than 500,000 unique customers, he added. The company also sends e-mail alerts on store promotions to a base of 1.5 million opt-in e-mail subscribers.


"DELIA*s business moves are the right thing to do in this market. The company is focusing on its best core assets with strong potential for growth," said Jeff Klinefelter, vice president and senior research analyst at U.S. Bancorp Piper Jaffray, Minneapolis. While he said there is relatively little competition in DELIA*s direct and retail space, he listed Charlotte Russe, Limited II and Alloy.com as possible competition in both arenas.


Klinefelter rates the company stock as a buy. "As the company focuses on profitable businesses, the stock should go up. [Bancorp's] short-term target for the stock is $7," he said.


The company expects that consolidated revenues for 2001 will be $160 million to $165 million, with roughly $105 million in direct sales and approximately $58 million in retail.


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