SPIEGEL EARNINGS PLUMMET 80.5% IN QUARTER
Byline: Jennifer Weitzman
NEW YORK — Stung by sales shortfalls in every merchandising category, The Spiegel Group Tuesday reported an 80.5 percent plunge in second-quarter profits.
The catalog-based multichannel retailer, based in Downers Grove, Ill., earned $5 million, or 4 cents a share, for the quarter ended June 30, compared to $25.8 million, or 20 cents, last year. Earnings were consistent with previous guidance and consensus estimates. With the troubled Eddie Bauer’s sales off 4 percent and same-store sales down 9 percent, overall sales for the quarter dropped 4.4 percent, to $831.9 million from $869.7 million.
Still, Spiegel said in a statement that it anticipates “substantial” year-over-year earnings improvement in the fall, particularly at Eddie Bauer, including 40 to 50 percent second-half earnings growth, weighted to the fourth quarter, and revenue expansion of 7 to 8 percent. For the third quarter, earnings are projected to be flat with last year’s earnings of 10 cents a share, and revenue to increase 3 to 5 percent.
“Although the economic outlook for the second half of the year remains uncertain, we have seen some positive indicators that should favorably impact our ability to reach our earnings objectives,” Martin Zaepfel, president and chief executive, said in a statement.
Much of the hope for the second half rests with Bauer and its 550 North American units. James R. Cannataro, chief financial officer, identified strategies aimed at reestablishing Bauer as a leading brand of classic, casual products aimed at men and women, aged 35 to 55, one of the nation’s fastest-growing demographic groups. Bauer’s products were seen as overly informal, with business casual available only on the Internet and in its larger stores, which make up only 12 percent of its base.
Steps taken include clarifying its brand positioning and identity to insure that it consistently speaks to customers, its new classically styled apparel offering, improved design coordination and greater emphasis on wardrobing and accessorization. The changes, including new fixturing, will be rolled out initially to 122 of Eddie Bauer’s top-performing stores, which generate roughly 50 percent of Bauer’s sales, by Sept. 5.
Bauer is deemphasizing store openings and is closing underperforming stores. For example, Bauer expects this year to open nine stores while closing 24. It also will open about 30 outlet stores.
Still, there is urgency for the new management to score a hit with its customers. According to Eric Beder with Ladenburg, Thalman & Co. Inc., Bauer’s sales last year were 47 percent of the company’s total and are projected to be the same this year. “They have got to stop the bleeding,” Beder said.
Jeffrey Klinefelter with U.S. Bancorp Piper Jaffray said he is “encouraged” by the turnaround prospects at Bauer, despite the difficult economy. He said he expected to see a modest improvement in the third quarter, picking up speed in the fourth quarter.
Spiegel’s stock rose 35 cents, to close at $10.55, close to the 52-week high of $10.72 that it reached July 23.
For the six months, the company reported a loss of $7.2 million, or 5 cents a share, compared with earnings of $42 million, or 35 cents, which includes an accounting change charge of $4.1 million. Sales fell 4 percent, to $1.58 billion from $1.64 billion.