On the Twelfth Day of Christmas, Catalogers Have Little to Cheer
October through December is by far the busiest and most profitable time for most catalogers, yet major players like Lands' End, J. Jill Group and JCPenney Co. aren't reaping the expected benefits of holiday purchasing in a robust economy.
J. Jill, which reported its fourth-quarter estimates this week, anticipates continued losses to round out the year because of an overall soft demand in its catalog division, the closing of its Nicole Summers catalog earlier this year and merchandising and circulation strategies. For the first half of 1999, its stock chugged along in the $15 to $25 range, but began to slip in August and now is $4 to $5 a share.
Meanwhile, initial results from J. Jill's 3-month-old Internet site, www.jjill.com, are "promising and underscore the viability of the J. Jill brand," according to a statement released by the company.
"Internet and e-commerce have really increased the level of competition," said Jill Frankle, director of retail research at Gomez Advisors, Lincoln, MA.
J. Jill's earnings are expected to be a roller-coaster ride over the next two years, according to Multex ACE, a database of 3,500 contributing analysts who cover public companies. Currently, earnings are expected to decrease 53 percent this year and rise 24 percent in 2000, representing a decline from 1998's $0.81 per share to $0.38 per share in 1999 then to $0.47 in 2000.
J. Jill's advantage, if its merchandising and circulation strategies can be worked out, would likely be in the combination of catalog and e-commerce with its recent foray into retail.
"The most successful companies in the apparel space will be the click-and-mortars who have the offline physical [retail] presence and the online avenue to sell to consumers," Frankle said.
Lands' End, Dodgeville, WI, had a similar arc, performing well in the first half of 1999 and dipping drastically in the last two months. Shares fell 25 percent after it announced this week that crucial holiday sales in the last five weeks were down 18 percent from the same period in 1998.
"We knew we had cut circulation by 20 percent, but we didn't expect that level of decline," said spokeswoman Charlotte LaComb.
The cataloger also sent out significantly fewer liquidation and promotional sale catalogs this year, according to LaComb; and overall softness in most cold-weather clothing categories because of unseasonably warm temperatures likely also factors in. But the cataloger continues to tweak its merchandise strategy.
"Starting in February, we're going to introduce some new merchandise with subtle differences that updates a lot of our basic styles to make them a bit more modern and current," LaComb said.
There are basic limitations to selling apparel, a tactile product, through either catalog or e-commerce. A few marketers -- most visibly Lands' End -- have sought to overcome it by creating virtual dressing rooms and employing real-time customer service representatives online, but it's hard to determine how effective those tactics are, coupled with increased apparel marketplace competition.
And while Internet sales overall continue to post strong gains over previous measurements, those gains must be put into perspective since it's easier to record sharp increases in such a young medium. Take JCPenney, for instance. E-commerce grew from $15 million in sales for 1998 to an anticipated $90 million this year. However, its catalog and retail divisions experienced disappointing performance last month.
"While our catalog sales were soft in November -- and, of course, December is still yet to come -- our year-to-date catalog sales are up slightly compared to 1998," said Stephanie Brown, a spokeswoman for the Plano, TX-based company. "Most of our catalog businesses are doing well -- i.e., our home, special sizes and women's fashion. Where we are struggling is in men's athletic apparel, shoes and basic jeanswear -- and that's industrywide."