Geerlings & Wade Cheers Stock Rise
The direct marketer of imported and domestic wines and wine-related merchandise experienced a 93.88 percent increase in its stock price, from 98 cents per share Jan. 28 to $1.90 on Feb. 24. The momentum accelerated the next day as the stock went as high as $2.42.
This performance contrasts sharply with much of the DM News Portfolio of 100 publicly traded direct marketing firms, 66 of which were in negative territory for February. Only 12 posted double-digit percentage increases.
"Hopefully, it's a start," said Huib Geerlings, the company's president/CEO. "Some people seem to be buying the stock again. I assume it's because of the fourth-quarter release we put out [Feb. 18]."
The company announced net income of $1.4 million for the fourth quarter compared with a $910,000 loss in fourth-quarter 2001. Income before taxes was $702,000 for the quarter compared with a loss before taxes of $498,000 in 2001.
Despite the strong income results, sales were down for the quarter. The company reported Q4 sales of $8.3 million, a 23 percent drop from 2001. Sales also fell 15 percent for the year -- $27.9 million compared with $32.7 million in 2001. Overall for 2002, the company posted a net loss of $1.7 million compared with a net loss of $1.5 million in 2001.
However, the lower Q4 sales were intentional, done to lower expenses, Geerlings said.
"Within our fourth-quarter success, don't forget that our sales were down from a year ago, which was consciously done because we wanted to get on a profitable footing," he said. "We focused our promotional effort to high-performing segments of the customer base rather than drive sales for sales' sake. We segment their behaviors, and we know when they are primed to buy again, so we narrowed our circs to promote to those people. And we tested some new customer acquisition strategies that were successful."
The company said that the elimination of unprofitable promotions and a weak holiday sales season also contributed to lower sales in the period.
The stock went from $1 to $1.45 on Feb. 18 and closed at $1.48 on Feb. 21.
"We're trying to reverse the declining trend in sales, but we're not there yet," he said. "It means dealing with some of the customer attrition we've had in the past few years. That's critical."
Cost efficiencies implemented include a change in how the company flows inventories to its retail points by adopting demand-based, or just-in-time, product flow.
"This means we have to finance less inventory at any given time," he said.
For 2003, profitability is not anticipated for the first or second quarters, but the company has "a yearly profitability goal."