Fingerhut Acquires Arizona Mail Order

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Beginning what it expects to become a series of catalog acquisitions, Fingerhut Companies Inc., Minnetonka, MN, last week acquired Arizona Mail Order, Tucson, AZ. The acquisition is expected to cost $120 million, subject to adjustment, and brings general merchandise cataloger Fingerhut into the apparel industry.


Arizona Mail Order, which has annual revenues of $140 million, sells women's apparel and shoes through the Old Pueblo Traders, Regalia, Intimate Appeal, Unique Petite and Coward Shoe brand names. Its last 24-month database includes 1.6 million names.


The acquisition is significant for Fingerhut not only because of its product line but because it appeals to older customers with an average age of 55. However, though it is a substantial step into the apparel market, the company doesn't plan to become a top fashion retailer.


"I'd call it classic apparel," said Fingerhut president William J. Lansing. "We as a company are more analytical. We are about looking back at behavior and determining what people will buy. We are not about spotting trends and guessing what will be a hit."


Because of the basic and more predictable appeal of the merchandise, Fingerhut considers the category non-risk apparel, said Michael Sherman, executive vice president for business development. Meanwhile, as apparel makes up 24 percent of mail-order sales, it was seen as a good market for Fingerhut to enter.


"We are in a position to lead consolidation in the industry," Sherman said. "We have the skills and the scale, and we saw a platform for growth in the apparel sector."


The company will continue to seek other categories that it sees as strong and compatible with its business, such as health, collectibles and some brands, Sherman said. As the company enters new categories and expands the age range of its customers, it may begin to target a wider range of income levels.


"We are not going to stick to the Fingerhut demographic. We may move up or down a notch or two. With our database capabilities, we can go beyond our traditional demographic," Sherman said.


Fingerhut expects Arizona Mail Order to benefit most from its new parent's credit and database experience. The company's Old Pueblo Traders catalog sells 50 percent of its products on credit but rejects many Fingerhut customers, Sherman said.


The company plans to mail Old Pueblo Traders catalog to its customer base and its Fingerhut catalog to their customer base. Arizona Mail Order's operations will remain in Tucson.
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