Retail Shift Costs Catalog SegmentWhen traditional DMers open retail stores, it sometimes comes at the expense of their catalog business, a fact made clear last week when two companies released year-end results.
Coldwater Creek Inc., Sandpoint, ID, which plans to open as many as 500 stores in the next several years, reported last week that net sales for its retail segment -- which includes full-line retail stores, resort stores and outlet stores -- skyrocketed 48 percent to $98 million in the fiscal fourth quarter ended Jan. 29, and 52 percent in the year to $296 million. The multichannel marketer of women's apparel also said that the retail segment represented 48 percent of its total net sales in the quarter, compared with 39 percent in the year-ago period. For the year, the retail segment represented 50 percent of Coldwater Creek's net sales compared with 37.5 percent a year ago.
However, the results told a different story in the direct segment. Net sales in that segment totaled $106 million in the quarter, a 3 percent gain. But for the year, net sales decreased 9 percent to $294 million. The company's catalog net sales fell 18 percent to $43.5 million in the quarter and plummeted 25 percent for the year. Catalog net sales totaled $132 million in 2004.
Coldwater Creek said earlier this year that it decreased catalog circulation in 2004 by 13 million. However, the company also planned to mail 3.2 million copies of a 12-page brochure to its in-house database that was intended to drive customers to its stores.
The online channel fared better. Net sales for Coldwater Creek's Internet segment rose 25.5 percent to $62 million in the fourth quarter. For the year, online sales totaled $162 million, a 9 percent increase.
"We are especially pleased with the sales growth of our Internet channel during the fourth quarter," company chairman/CEO Dennis Pence said in a statement. "As direct segment customers shift to this channel, we will continue to primarily use catalogs as our most effective advertising vehicle to promote the brand and drive traffic to both retail stores and the Internet."
The shift into retail is proving beneficial for Coldwater Creek's bottom line. The company's overall net sales in the fourth quarter rose 21 percent to $204 million. For the year, net sales totaled $590 million, a 14 percent gain.
Retail sales were also up and direct sales were down for The J. Jill Group Inc., Quincy, MA, which reported fourth-quarter and year-end results last week.
In fiscal 2004, the multichannel marketer of women's apparel saw its retail business grow 35 percent, to represent 55 percent of its total business, president/CEO Gordon C. Cooke said in a statement.
"Retail's contribution increased by $16.5 million to 9.2 percent of segment net sales from 3.2 percent of segment net sales last year," Cooke said. "In contrast, our direct segment net sales declined by 2 percent in fiscal 2004, with the fall business weakening dramatically when compared to the spring business. We attribute this weakness primarily to the many initiatives we have implemented to improve our results in retail, including the overall store count."
J. Jill plans to open 40 stores in fiscal 2005. The company is "reassessing the size of our direct business with an eye toward rightsizing it in order to maintain its profitability," Cooke said.
J. Jill's net sales for the fiscal fourth quarter ended Dec. 25 totaled $119 million, a 4 percent increase from the previous year. Comparable-store sales rose 2.4 percent in the period.
Also, annual net sales reached $435 million in fiscal 2004 compared with $377 million for the prior year.
Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters