Byline: Thomas J. Ryan

RIO RANCHO, N.M. — Fulcrum Direct Inc., which last month launched the Zoe junior catalog, plans to sell 3 million shares in an initial public offering.
The firm, which operates eight catalogs, including After the Stork, Playclothes and Storybook Heirlooms, would raise $24 million from the offering if the deal were priced at the midpoint of the projected range of $8 to $10 a share.
Fulcrum, which sells apparel, shoes and accessories, was established in March 1994 with the acquisition of the After the Stork children’s wear catalog.
However, the company has made two major acquisitions in the last year — the Playclothes children’s catalog from Walt Disney last December for $1.4 million, and Storybook Heirlooms Inc. girls’ wear last June for $15 million.
The company also operates Little Feet, which sells shoes and hosiery, and SunSkins, sun protective apparel, and has been test-marketing a Sears catalog.
Under its agreement reached with Sears in June 1997, Fulcrum will sell its products under the Sears logo to select individuals of Sears 20 million-name customer file, who currently are not buying from Sears. Sears discontinued its catalog in 1995.
The test will continue through the rest of this year, and then Fulcrum said it may enter into a strategic alliance with Sears. Profits will be split between the two companies, said Fulcrum.
Fulcrum lost $6.9 million in the six months ended June 30 as a result of various expansion costs.
These include a 105 percent hike in advertising costs, start-up costs of $2.1 million from the Playclothes acquisition and a $1.8 million charge related to a change in the accounting for renting customer lists.
Fulcrum has obtained lists from Gymboree Corp., Oshkosh B’Gosh and Walt Disney.
The loss also reflects increased investments in management, training, facilities and systems.
Sales in the half climbed 37.4 percent to $23.1 million from $16.8 million. However, if Storybook sales had been included from the beginning of this year’s half, sales would have been $38.1 million.
Despite the sales gains, the prospectus notes net revenues per catalog decreased 40.8 percent to $1.64 from $2.77 due to lower response rates than last year’s.
The decline was attributed to test mailings of the Playclothes catalog, expansion of After the Stork circulation and the decline in Japanese orders as a result of the strength of the dollar against the yen.
The proceeds of the offering would be used as follows: $10 million to repay debt; about $3.2 million to certain officers and directors to purchase the firm’s trademarks, headquarters, call center and distribution center, and the rest earmarked for expansion.
Fulcrum said in its prospectus that it believes the children’s and girls’ catalog market is underserved, pointing out that less than 3 percent of all children’s apparel is purchased through catalogs compared with nearly 10 percent of women’s apparel.
Fulcrum said it plans to take advantage of the maturing of the baby boom generation, which is expected to lead to historically high birth rates through 2005.
Zoe, launched in August, “provides the company an attractive opportunity to target a new, older segment of its market that can significantly leverage its customer relationships with mothers.”
Once tested, Zoe may be expanded in 1998.
Michael G. Lederman, chairman and chief executive officer, owns 6.3 million shares, which will represent a 53 percent stake after the offering is completed.
Lederman had been general partner at Japonica Partners, an investment partnership, during its acquisition of Sunbeam Corp. from bankruptcy.

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