Spiegel profits tumble as sales fall
July 27, 2001-- Home Textiles Today,
Downers Grove, IL — Pummeled by falling sales, eroding margins, higher costs and rising debt levels, second-quarter profits at direct-mailer Spiegel Inc. tumbled by 80.5 percent, to $5.0 million from $25.8 million last year.
With sales in the core catalog business falling by almost 15 percent, retail sales at Spiegel declined by 5.2 percent, to $674.7 million from $711.8 million last year. Picking up some of the slack, however, Internet sales zoomed up by 61.1 percent, to $75.4 million from $46.8 million the prior year, a gain of almost $29 million.
Acting as a further drag on the bottom line, average gross margin contracted by 190 basis points, to 38.4 percent from 40.3 percent a year ago. Stunted by the weakened top line, expenses climbed higher as a percentage of sales by 320 basis points, to 57.8 percent from 54.6 percent.
Rising debt levels and interest expense took another big bite out of the bottom line. With long-term debt climbing by more than 35 percent, to $1.1 billion from $833.3 million last year, interest expense advanced by 20.2 percent, to $18.7 million from $15.6 million.
"We expect substantial year-over-year improvement in the fall season vs. last year's weaker sales period, particularly at Eddie Bauer," said James Cannataro, executive vp and cfo. "Inventory levels are well positioned, and we have taken a cautious approach to ownership of fall inventory."