The Spiegel Group announced financial results for the first quarter ended March 31, 2001. The company reported a net loss of $12.2 million, or $0.09 per share, compared to earnings of $20.2 million, or $0.15 per share, before the cumulative effect of an accounting change, in the first quarter of 2000. Results were consistent with previous guidance and First Call consensus estimates.
“As expected, the first quarter presented a more challenging economic environment as well as difficult comparisons to last year’s strong first quarter results,” stated James W. Sievers, office of the president and chief financial officer of The Spiegel Group. “We experienced higher charge-offs in our credit card businesses and customer response in each of our merchant companies was relatively weak. Clearly, the economy has negatively affected consumer behavior and our financial results.”
Operating income declined by $47.2 million for the quarter, including a $51.8 million decrease in income for the merchandising segment and a $4.4 million improvement in the bankcard segment.
Total revenue for the quarter declined 3 percent to $749.6 million reflecting a 3 percent decrease in net sales and a 10 percent decrease in finance revenue.
Net sales for the quarter included a 2 percent decline in direct sales and a 3 percent drop in retail store sales. Direct sales are comprised of a 94 percent lift in e-commerce sales and a 13 percent decrease in catalog sales. The drop in retail store sales was due to a 10 percent decline in Eddie Bauer’s comparable-store sales offset somewhat by sales growth in its outlet stores.
The decline in finance revenue was primarily attributable to lower securitization income, which includes retained-interest income from securitized receivables and net pretax gains on the sale of receivables. While the yield on receivables rose in the quarter along with the level of receivables serviced, higher charge-offs negatively impacted the performance of the credit card business, particularly in the private-label programs, resulting in lower excess cash flows from the securitization of receivables, which reduced finance revenue. In addition, due to lower receivables sold during the quarter, net gains on the sale of receivables were $8.4 million in this year’s first quarter compared to $15.5 million in the same period last year. The $7.6 million decrease in finance revenue reflects a $15.1 million, or 34 percent, decline in revenue from the private-label credit card programs net of a $7.5 million, or 24 percent, increase in bankcard revenue.
The gross profit margin as a percent of net sales decreased in the first quarter to 35.0 percent from 35.9 percent in the year-earlier period. Margin growth achieved by the company’s Newport News and Spiegel divisions was offset by lower margins at Eddie Bauer. Eddie Bauer’s margin decline was driven by higher markdowns versus last year.
Selling, general and administrative expenses as a percent to total revenue increased by 530 basis points to 47.0 percent for the quarter. This increase resulted from lower productivity on catalog circulation for each of the Group’s merchant companies and weaker performance from private-label credit card programs compared to the prior year.
Commenting on the company’s outlook, Michael R. Moran, chairman of the office of the president, stated, “Given the challenging economic environment, we have intensified our efforts to reduce expenses and conservatively manage our inventory commitments going forward. Although the economic outlook for the second half of the year is uncertain, we have taken important actions in our credit business and our Eddie Bauer division that are expected to positively impact earnings.”
The company confirmed its previously issued guidance for the second quarter, calling for modest revenue growth and earnings of $0.02 to $0.05 for the quarter ending June 30, 2001.
For more details on Spiegel’s 1Q/01 results visit CardData ([www.carddata.com])