Spiegel sales drop leads to 3Q loss

Don Hogsett, November 5, 2001

Downers Grove, IL — With retail sales tumbling in the midst of mounting consumer uncertainty — and hobbled by mounting bad-debt charge-offs in its big credit business — Spiegel Inc. recorded a third-quarter loss of $12.3 million, compared with a year-before profit of $13.5 million.

Overall sales at Spiegel, including retail and credit revenues, tumbled by 12.9 percent, to $703.8 million from $807.5 million last year, a drop of more than $100 million. Retail sales at the direct-mail retailer fell by 10.8 percent, to $574.7 million from $644.0 million a year ago, with each of the company's four merchant divisions reporting sales weakness. Direct-mail sales were off by 13 percent, while sales in bricks-and-mortar stores fell by 7 percent. Internet sales continued to provide a big lift, jumping up by 42 percent.

Particularly hard hit was the Eddie Bauer division, where same-store sales fell by 15 percent, offset somewhat by sales growth in its outlet stores.

Putting earnings under further pressure, margins narrowed by 180 basis points, to 34.2 percent from 36.0 percent a year ago, due mostly to higher markdowns and additional marketing promotions at Eddie Bauer. But continued cost-cutting provided some measure of relief, and overhead was pared by 7.1 percent, to $326.8 million from $351.8 million last year, a cash savings of $25.0 million.

Going forward, the company remains cautious, said James Cannataro, executive vp and cfo. "In planning holiday season demand, we took a conservative approach in our inventory commitments. We expect the retail environment to remain challenging in the fourth quarter. As a result, we have intensified marketing promotions and will continue to tightly manage expenses."

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