Spiegel Offers a Catalog of Bad News

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Multichannel fashion apparel and home furnishings retailer Spiegel Inc. in the fourth quarter delivered bad news for investors, reporting a 13 percent drop in revenue to $1.01 billion, from $1.16 billion a year earlier.


According to Bloomberg, Spiegel's shares as of Feb. 25 were down 16.92 percent from January. The value of the DM News Portfolio in the same period fell only 1.53 percent to $98,473.


Spiegel's shares started off February on a positive note, gaining 12 cents to close out trading on Feb. 1 at $3.15. On Feb. 5 its shares rose to its monthly high of $3.18, but it has been downhill since. On Feb. 14, Spiegel's shares ended trading at $2.90. The following day it lost 8 cents to close at $2.82.


However, there could be light at the end of the tunnel, as Spiegel's shares closed Feb. 25, up 20 cents at $2.70.


Continuing the bad news for investors, Spiegel reported a net loss of $397.6 million for 2001. The company also said it will sell its credit card business as part of its plan to refocus on its retail business. In addition, Spiegel plans to sell its First Consumers National Bank subsidiary.


The company, based in Downers Grove, IL, recorded an estimated loss related to the sale of its credit card business of $310.5 million, or $2.35 per share as discontinued operations.


"We have made a strategic decision to remove the credit card operations from our business mix to intensify our focus on our core retail business and strengthen our financial position," Martin Zaepfel, vice chairman, president/CEO of The Spiegel Group, said in a statement. "As part of this transaction, we will form a relationship with a third party to provide private label credit card programs to our customers."


At least one analyst considers Spiegel's plan to sell its credit card business as positive development for the company. He noted the company's credit card operations had been losing money all year and it had been preoccupying management's time.


"The credit card division had been in free fall for most of the year and appeared to have taken a significant chunk of valuable management time," said Eric Beder, an analyst at Ladenburg Thalmann & Co.


He also said that while the sale of the credit card division, which is expected to be completed in the second quarter, would help straighten out the company's finances, it introduces a problem in the short term. Since a large portion of Spiegel's catalog and Newport News sales are credit driven, he said, this could negatively affect 2002 results.


The company said net sales for 2001 fell to $2.8 billion, from slightly more than $3 billion in 2002.


For the fourth quarter, Spiegel reported net sales of $920.9 million, compared with net sales of more than $1 billion in the fourth quarter a year earlier. Its net loss for the fourth quarter was $378.1 million, or $2.86 per share.


Spiegel's Eddie Bauer division reported sales for 2001 fell 9 percent to $1.6 billion, from $1.7 billion in 2000. Net sales at its Newport News division fell 6 percent for the year to $488.9 million, from $479.1 million. Spiegel catalog sales declined 12 percent to slightly more than $734 million, from $833.4 million a year earlier.


Its Eddie Bauer division has hired a brand consultant to "evaluate its brand positioning" and hopes to have the results in time to reposition the clothing retailer in time to have a positive impact on its fourth quarter results. Spiegel said it will close 45 Eddie Bauer stores and open five new ones in the coming year.


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