Spiegel, Inc. Reports Fourth-Quarter and Full-Year 1998 Results
DOWNERS GROVE, Ill., Feb. 16 /PRNewswire/ -- Spiegel, Inc. (Nasdaq: SPGLA)
today reported a 30 percent increase in net earnings for the fourth quarter,
the fifth consecutive quarter of year-over-year improvement.
The company reported net earnings of $41.5 million, or $0.32 per share,
for the quarter ended January 2, 1999, compared with fourth-quarter earnings
of $31.9 million, or $0.27 per share, a year earlier. Fourth quarter 1998
results include receivable gains in accordance with SFAS 125 of $0.08 per
share, compared to $0.19 per share in the fourth quarter of 1997.
James W. Sievers, Office of the President and Chief Financial Officer of
Spiegel, Inc., said, "We are pleased that during each quarter of 1998 we
improved upon our year-earlier earnings performance. At the same time, we
strengthened our balance sheet by reducing debt 25 percent and tightly
controlling inventory levels. Additionally, our fourth quarter earnings
performance allowed us to reach our overriding objectives for 1998, returning
to profitability and achieving positive cash flow."
Total revenue for the fourth quarter decreased 8 percent to
$1.017 billion, compared with $1.112 billion a year earlier, reflecting an
8 percent drop in net sales and a 10 percent decline in finance revenue. In
addition, comparable-store sales for the company's Eddie Bauer division fell
7 percent for the quarter. The fourth quarter of 1998 included 13 weeks
compared with 14 weeks in the fourth quarter of 1997.
The decline in net sales for the quarter reflects a 13 percent decrease in
catalog sales, a 4 percent decrease in retail sales and the impact of an
additional week in last year's fourth quarter.
Excluding the fourteenth week in 1997, fourth quarter net sales would have
shown a 5 percent decline. Lower catalog sales were a result of a reduction
in catalog pages circulated by Spiegel Catalog and lower customer response to
the Eddie Bauer catalog mailings. Retail sales for the quarter were down
primarily due to the decline in Eddie Bauer's comparable-store sales, offset
somewhat by sales contributed by new stores. Unseasonably warm weather during
most of the quarter dampened demand for outerwear and other cold-weather
related products.
The decrease in finance revenue was due to the impact of accounting for
receivable gains. Finance revenue for the quarter includes a pretax gain on
the sale of receivables of $16.9 million recognized pursuant to SFAS 125,
compared to a pretax gain of $32.8 million in the fourth quarter of 1997.
Excluding the impact of receivable gains, finance revenue generated from the
company's private-label Preferred Charge cards increased 29 percent and
finance revenue on the FCNB bankcard portfolio rose 15 percent, compared to
last year's fourth quarter. These increases resulted from improved
performance of the Preferred Charge and bankcard portfolios, as well as growth
in the bankcard receivables.
The company's gross profit margin as a percent of net sales increased in
the fourth quarter to 35.1 percent from 33.0 percent in the year-earlier
period, reflecting margin improvement in each of the merchant divisions.
Margins benefited from a heightened focus on inventory controls. Consolidated
year-end inventories were 4 percent lower than the year-end level in 1997,
even though Eddie Bauer added 47 stores.
Selling, general and administrative expenses in the fourth quarter were
31.2 percent of total revenue compared with 31.5 percent in the year-earlier
period. This improvement resulted primarily from higher catalog sales
productivity in the Spiegel Catalog and Newport News divisions, offset
somewhat by lower productivity on Eddie Bauer's catalog sales. The SG&A ratio
also benefited from favorable charge-off experience in the company's Preferred
Charge portfolio.
Commenting on 1998 results, Sievers added, "The Spiegel Group realized
progress in both its merchandising and bankcard segments in 1998. The key
factors that contributed to the progress in our merchandising segment included
the improving performance of Spiegel Catalog, solid sales and earnings gains
by Newport News, and the significant earnings contribution realized
from our Preferred Charge programs. Although Eddie Bauer recorded another
profitable year, their overall results fell short of our expectations. In
addition, our FCNB bankcard segment recorded strong operating results.
Collectively, these factors resulted in a $97 million improvement in operating
income, excluding the impact of SFAS 125 receivable gains."
For the fiscal year ended January 2, 1999, the company reported earnings
before the redemption of preferred stock of $11.8 million, or $0.09 per share,
compared to a net loss of $33.0 million, or $0.28 per share, for the 1997
fiscal year. The 1998 fiscal year results include pretax gains on the sale of
receivables of $45.3 million, or $0.23 per share, compared to $75.1 million,
or $0.43 per share, for the 1997 fiscal year. Total revenue for the year
decreased 4 percent to $2.935 billion.
The Spiegel Group's catalog businesses, including Spiegel Catalog, Eddie
Bauer and Newport News, generated net sales of $1.311 billion in 1998,
compared with $1.482 billion in 1997. The company's retail stores, which are
primarily Eddie Bauer, produced $1.331 billion in net sales for the year,
compared with $1.353 billion in 1997. Eddie Bauer's new-store openings in
1998 increased its retail base to 555 stores from 508 at year-end 1997.
Looking ahead, Michael R. Moran, Office of the President of Spiegel, Inc.,
said, "Now that we have returned The Spiegel Group to profitability, we are
committed to keeping it there and generating consistent profit growth in 1999
and the years ahead. We remain excited about our company's outlook. We have
a strong presence in established and growing marketing channels, including
catalogs, specialty retail stores and the Internet. We have made important
strides in sharpening the focus of our merchandise and assortments, enhancing
customer services, including our Preferred Charge programs, and in building
the brand equity of Eddie Bauer, Newport News and Spiegel Catalog. We also
have reduced costs across our merchandising business and provided a solid
platform for continued progress. In addition, we have diversified and
strengthened our FCNB bankcard business, positioning it for further growth."
This press release contains statements that are forward-looking statements
within the meaning of applicable federal securities laws and are based upon
Spiegel, Inc.'s current expectations and assumptions, which are subject to a
number of risks and uncertainties that could cause actual results to differ
materially from those anticipated. Potential risks and uncertainties include,
but are not limited to, factors such as the financial strength and performance
of the retail and direct marketing industry, changes in consumer spending
patterns, dependence on the securitization of accounts receivable to fund
operations, state and federal laws and regulations related to offering and
extending credit, risks associated with collections on the company's credit
card portfolio, interest rate fluctuations, postal rate increases, paper and
printing costs, the success of planned merchandising, advertising, marketing
and promotional campaigns, and other factors that may be described in the
company's filings with the Securities and Exchange Commission.
Spiegel, Inc. is a leading, international specialty retailer, marketing
fashionable apparel and home furnishings to customers through catalogs, more
than 550 specialty retail stores and four Internet sites (www.eddiebauer.com,
www.spiegel.com, www.spiegeltronics.com and www.ultimate-outlet.com).
Spiegel's businesses include Eddie Bauer, Eddie Bauer HOME, A/K/A EDDIE BAUER,
Newport News and Spiegel Catalog. Spiegel's Class A Non-Voting Common Stock
trades on the Nasdaq National Market System under the ticker symbol: SPGLA.
Spiegel, Inc. and Subsidiaries
Consolidated Statements of Earnings
($000s omitted, except per share amounts)
13 Weeks 14 Weeks 52 weeks 53 weeks 1
ended ended ended ended
Jan 2, 1999 Jan 3, 1998 Jan 2, 1999Jan 3,
1998
Net sales and other revenues:
Net sales $940,848 $1,027,728 $2,641,956 $2,835,297
Finance revenue 63,660 70,682 251,233 178,293
Other revenue 12,336 13,406 42,222 43,244
1,016,844 1,111,816 2,935,411 3,056,834
Cost of sales and operating
expenses:
Cost of sales, including
buying and occupancy
expenses 611,013 688,858 1,807,569 1,941,307
Selling, general and
administrative expenses 317,407 350,644 1,041,999 1,096,835
928,420 1,039,502 2,849,568 3,038,142
Operating income 88,424 72,314 85,843 18,692
Interest expense 18,105 18,724 67,733 68,098
Earnings (loss) before
income taxes 70,319 53,590 18,110 (49,406)
Income tax provision
(benefit) 28,791 21,724 6,305 (16,385)
Earnings before redemption
of subsidiary preferred
stock 41,528 31,866 11,805
(33,021)
Redemption of subsidiary
preferred stock(1) 0 0 8,535 0
Net earnings (loss) $41,528 $31,866 $3,270 $(33,021)
Net earnings (loss) per
common share $0.32 $0.27 $0.03 $(0.28)
Weighted average number
of common shares
outstanding 131,715,391 118,143,431 128,656,398 116,193,587
(1) In April 1998, Newport News, a subsidiary of Spiegel, Inc., redeemed
all outstanding shares of its redeemable preferred stock. The excess of the
redemption price over the carrying value of the preferred stock reduced income
available to common shareholders.
Spiegel, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
($000s omitted)
Operating Income
13 Weeks 14 Weeks 52 weeks 53 weeks
ended ended ended ended
Jan 2, 1999 Jan 3, 1998 Jan 2, 1999 Jan 3, 1998
Operating Income/
(Loss) Before SFAS
125 Receivable
Gains $71,510 $39,531 $40,515 $(56,449)
SFAS 125 Receivable
Gains 16,914 32,783 45,328 75,141
Operating Income $88,424 $72,314 $85,843 $18,692
Spiegel, Inc. and Subsidiaries
Condensed Balance Sheets
($000s omitted, except per share amounts)
Jan. 2, Jan. 3,
ASSETS 1999 1998
Receivables, net $544,146 $563,376
Inventories 490,915 508,756
Other current assets 220,433 172,691
Property and equipment, net 359,361 394,822
Intangibles and other long-term assets 242,405 309,909
Total assets $1,857,260 $1,949,554
LIABILITIES and STOCKHOLDERS' EQUITY
Current maturities of debt $85,714 $102,900
Other current liabilities 577,537 534,322
Long-term debt, excluding current
maturities 523,036 713,750
Deferred income taxes 33,706 32,982
Total liabilities 1,219,993 1,383,954
Stockholders' equity 637,267 565,600
Total liabilities and stockholders'
equity $1,857,260 $1,949,554
SOURCE Spiegel, Inc.
CO: Spiegel, Inc.
ST: Illinois
IN: REA
SU: ERN
02/16/99 09:00 EST prnewswire.com
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