Byline: the Catalog Age staff

While holiday 2004 sales were adequate for most of the merchants contacted by Catalog Age, overall results hardly suggest that a robust economic recovery is under way. "Our sense is that few had a great year," says Bill LaPierre, vice president, catalog brokerage at Peterborough, NH-based list services firm Millard Group. "The majority were just at plan, and many others were 5%-7% below plan."

Food catalog Swiss Colony is a case in point. Its holiday sales increased 5%-6% on the same increase in circulation, which "wound up pretty close" to expectations, says president John Baumann. One problem the Monroe, WI-based title ran into was inventory shortfalls. From mid-November until Christmas, Swiss Colony was running short on almost all its products. Baumann says the issue did not significantly hurt sales, though, because the company was able to manufacture extra quantities of products and to train call center reps to suggest similar products to customers ordering out-of-stock items.

The other catalogs owned by Swiss Colony's parent company, also named Swiss Colony, "were on budget," Baumann says. These include general merchandise titles Ginny and Seventh Avenue, and women's apparel and home decor books Midnight Velvet and The Country Door. "Our [overall] sales were up 5% for the year. We didn't do anything dramatically new in the catalogs, and the circulation was up slightly over 2003."

Like Swiss Colony, the Spiegel Catalog experienced product shortfalls. Holiday sales for the general merchant came in about 5%-10% below plan, says Geralynn Madonna, CEO of New York-based Catalog Holdings Corp., parent company of Spiegel Catalog and women's apparel title Newport News. The company had slashed circulation of the core Spiegel book 50%, to less than 2 million.

Catalog Holdings Corp., which was formed by Spiegel senior management and San Francisco-based private equity firm Golden Gate Capital this past summer, bought the two catalogs from Downers Grove, IL-based Spiegel Group, which had filed for bankruptcy in March 2003. The transition period affected the company's ability to stock up for holidays, Madonna says, so the catalogs suffered many cancellations from customers due to backorders. "But considering where we were when we bought [Spiegel] in July - moving all of the inventory from Ohio to Virginia, getting all of the IT on one platform - the holiday was pretty successful," Madonna says.

And in fact, Newport News fared rather well: Despite a 14% cut in fall/holiday circulation, fall/holiday revenue was up 8%. Madonna attributes the performance in part to fewer promotions and markdowns. Newport News' holiday business is not as large as Spiegel's, however.

Total holiday sales were 2% below plan at Oshkosh, WI-based Miles Kimball Co., says president Mike Muoio. Yet the total number of orders increased "in the single digits" against plan. The $203.0 million multititle mailer includes low-end gifts book Miles Kimball, gifts and housewares title Walter Drake, garden and home decor catalog The Home Marketplace, and Exposures, a photo and archival accessories title. Miles Kimball is owned by $1.3 billion Greenwich, CT-based candles and home decor products manufacturer Blyth.

"Our demand in terms of total orders was about 2% over but 2% under in dollars," Muoio says. "We got lots of orders, but they were getting smaller, so our average order size went down."

Retailers' emphasis on price cutting and promotions may be partly to blame. "Retail is having a much bigger impact on mail order sales than in years past," Millard Group's LaPierre contends. "It's always been an issue, but more so this year. The sheer number of retail sales is eating into our traditional catalog business. And catalogers are not keeping up with the fact the consumer is looking for more value," he says, citing the rise of the dollar stores.

Brick-and-mortar woes

But even multichannel merchants that sell via stores suffered. Total holiday sales at women's apparel cataloger/retailer J. Jill fell short of goal, rising just 4%, to $119.0 million. Direct sales were especially disappointing, although at press time the Quincy, MA-based company had yet to release full results. "Since early November, the top-line performance in our direct business has not met our expectations, as we experienced a significant shift of customers toward our retail segment," president/CEO Gordon Cooke said in a statement. He added that some of J. Jill's retail initiatives "could potentially be detracting from the performance of our direct segment."

Catalog sales slipped at San Francisco-based gadgets merchant Sharper Image. Total December catalog/direct marketing sales (including wholesale) fell 3%, to $23.0 million compared with $23.9 million for December 2003. Total Sharper Image sales rose a disappointing 6%, to $164.3 million, while comparable store sales decreased 7%.

Like Spiegel, Sharper Image blamed some of its weak performance on stock shortages. For example, Sharper Image couldn't get its hands on sufficient quantities of Apple Computer's popular iPod. The iPod doesn't carry great margin for Sharper Image but does generate store traffic, says Sharper Image spokesperson Tersh Barber. The lack of iPods in stores "probably hurt us in other areas, like Sharper Image-designed and Sharper Image-branded electronics."

The West Coast port slowdown also hurt Sharper Image's in-stock position, Barber says. Beginning in July, congestion at the ports and a shortage of dockworkers created havoc for marketers and led to delays in inventory deliveries. The slowdown, which eased in November, "left us tighter than we would have liked," Barber says.

Another San Francisco-based cataloger/ retailer, Williams-Sonoma, also deemed holiday sales "disappointing." Net revenue increased only 7%, to $775.9 million for the eight weeks ended Dec. 26. According to a statement, the company's Pottery Barn home decor brand saw a "weaker than expected consumer response" in its direct and retail channels. The company's total direct-to-customer net sales for the holiday period increased 9%, to $235.5 million. Retail net sales increased 7%, to $501.1 million. In addition to the eponymous kitchenware brand and Pottery Barn, Williams-Sonoma's businesses include home furnishings and storage brands West Elm and Hold Everything.

Merrimack, NH-based cataloger/retailer Brookstone, which mails the Brookstone, Hard-to-Find Tools, and Gardeners Eden catalogs, said direct-to-consumer holiday sales increased 26%, to $42 million for the nine weeks ended Jan. 1. Internet sales gained 34%. Total sales increased 8%, to $215 million. Yet same store sales fell short of goal, leaving Brookstone disappointed in its overall holiday performance. The company blamed its lackluster season in part on disappointing sales of massage and audio products.

Some cause for celebration

That's not to say all mailers suffered during the season. Holiday sales at Dallas-based Neiman Marcus Direct, which mails the upscale Horchow and Neiman Marcus catalogs, increased 14%. Revenue at parent company Neiman Marcus increased 8%, to $585 million, and comparable revenue in its specialty stores, which include Bergdorf Goodman, rose 10%.

Another luxury brand, New York-based Vivre, finished 2004 with a 56% year-over-year boost in holiday revenue. Even so, back in August the company had expected even more robust sales, says CEO Eva Jeanbart-Lorenzotti. "We credit this to two influences on consumer spending at the end of the year: an early November that was not as strong as expected due to the elections, and the fact that brick-and-mortar merchants began discounting much earlier than normal."

Freeport, ME-based L.L. Bean has no complaints about the holiday season. For the four weeks leading up to Christmas, sales were up 10% from the previous year, says Rich Donaldson, spokesperson for the apparel and outdoor gear merchant. And considering that Christmas 2003 had been Bean's best ever, he adds, "we had pretty conservative estimates for 2004." Donaldson attributes the strong showing in part to more television advertising and continued e-mail promotions to goose traffic to the Website.

Also happy is Toni Morell, managing partner of Ann Arbor, MI-based Zingerman's. The food gifts mailer's holiday sales rose 25% from 2003. Morell credits the results to its circulation hike: The company mailed 700,000 holiday catalogs in 2004, up 59% from the previous year. Zingerman's also rented more names - 500,000 for holiday '04, vs. 300,000 for holiday '03.