L.L. Bean CEO: We'll Cut Number of Catalogs in 2002

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NEW YORK -- L.L. Bean is producing too many catalogs and plans to reduce the number from the current 95 titles. That was the message from CEO Chris McCormick, who was the keynote speaker at the Direct Marketing Association Catalog Council's Annual Networking Dinner on April 25.

The company publishes 10 core books and 85 specialty catalogs.

"Ninety-five titles is too many," he said. "You can't do a good job when you produce that many catalogs. We'll reduce that dramatically in 2002."

The 18-year veteran of L.L. Bean revealed during the Q&A session that the company's best customer receives up to 80 catalogs in a 12-month period.

"Do you really make money on the 80th catalog?" he asked. "I don't think so."

Also covered was the closing of the "marginally profitable" Freeport Studio as well as a re-organization in January that included eliminating 210 jobs.

"There's more to come," said McCormick, who is L.L. Bean's first non-family member to lead the company. "There are too many catalog companies vying for the same dollars."

The numbers behind this: 12,000 catalog companies in the United States mail 16 billion catalogs.

More tough news came when he told the audience that retail prices of apparel have fallen in six of the past eight years.

"A turnaround is not in sight," McCormick said. "In a flat market, you're going to have price wars. What you're really saying is that you're in a market share game. You don't want to fight a price war unless you're the low-cost producer. And we're not the low-cost producer."

Increases in various expenses for the company between 1985 and 2001 added to the difficult message: postage, 115 percent; wages and salaries, 523 percent; healthcare costs, 1,300 percent; and depreciation expenses, 900 percent. A 64 percent increase has been realized in the consumer price index over the same period while catalog numbers are up 30 percent.

"It doesn't add up," he said. "That's the type of pressure you have."

McCormick said he is looking forward to 20 percent growth in the Internet channel this year.

"Our customer is 51 years old, and I don't think they're as Net-savvy," he said. "Anybody who buys from multiple channels is worth 30 percent more to L.L. Bean. We're trying to convert a retail customer into a multichannel customer."

During this decade the fastest-growing segment, in terms of age, will be the 55-to-64 group, he said.

"Are you ready to tap into the 55-to-64 group?" he asked. "We have to make sure we understand their needs, and I'm not sure we do."

McCormick covered many of his challenges since being promoted to CEO in May 2001. A board of directors meeting included news of the second-best spring season in company history with an optimistic look to the future. That was Sept. 7.

McCormick saw his company hit with plummeting sales in the weeks after the Sept. 11 terrorist attacks.

"We had to run down tractor-trailers to stop delivery of catalogs to be mailed," he said.

In a Sept. 13 meeting, the fall season was forecast to be down $65 million. It was down $69 million.

"We canceled or pushed out $25 million in inventory," McCormick said. "When you're in economic uncertainty, you must preserve cash, and that's what we did."

That was followed by the anthrax scare with hundreds of customers telling the company, "Don't mail me a catalog."

They were asked to go to L.L. Bean's Web site, and the company worked with FedEx to develop special tape to be used for shipments. Broken tape meant the shipment was not to be opened.

Then the pranks came.

"People sent us flour," he said. "It would spill out, and we would have to stop everything and call the fire department."

McCormick outlined a response to the difficulties the company faces, including improved customer service, spending more on television advertising and updating the product line. The company has 35 million households in its database.

"At 213 million circulation, we have the base for TV to work," he said.

With $1.1 billion in sales last year, growth is the company's No. 1 priority.

"We'll always support fishing and hunting, [and] there may be licensing opportunities," he said. "Women are telling us our clothes are not where they should be, and we're updating that. We're understated. We expect the market to figure it out. It's a different market. We whisper we have a better product. We need more of a competitive spirit. We need a greater sense of accountability."


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