Retail Industry Update
by Risa Kaplan (TMF Style)

SAN FRANCISCO, CA (June 12, l997) -- Retail business has picked up with the warmer weather as customers began making some long-awaited seasonal purchases in the first week of June. LJR Redbook's latest indicator of national retail sales shows sales up 2.3% in the first week of June from May. The report also shows seasonally adjusted sales in the one-week period up 8.8% from the same period in 1996. Discounters were the major beneficiaries of the seasonal change but sales were generally on-plan for most retailers.

YOU GOTTA HAVE A GADGET

Liberace once said that the difference between men and boys is the price of their toys. Forget the ties, the cologne and the funny T-shirts, for Father's Day, look at those ingenious little machines or handy dandy items that Dad just can't live without.

Everyone needs a "Supermatch," which enables pyromaniacal hosts to light candles in hard-to-reach places. Its crystal ignition system sounds really cool ($28). Or a "10-in-One" portable radio with a siren and seven-position search light; a clear necessity and just $60. The pop-up hot-dog cooker cooks two dogs while it warms two buns for $49.95. And how about that basketball rim illuminator for the backyard? On the Internet, Surveillance Plus offers a pen that shoots a laser beam as well as a device that circumvents wiretaps for the James Bond in your house.

In marketing and promoting these gadgets, retailers understand that for the average male to appreciate the gadget there must be purpose. Sure, they should be shiny, and cool looking, but does it get the job done?

Since many fathers will be checking their e-mail instead of their snail mail for a Father's Day card this year, faraway kids can say, "Thanks, Dad!" via the Internet using Vivitar's MPP-2i computer video phones. The monitor-top camera records a full-color, sound and live motion video, which is compressed and sent as an attached e-mail message. Of course it isn't a digital necktie with painted fish.

So where can a shopper go to find these powerful, dynamic, enhanced , 4-watt capable, removable, batteried, fits easily, digitizing and maximizing thingamajigs? Here are some publicly traded companies that are selling just that.

SHARPER IMAGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHRP)") else Response.Write("(Nasdaq: SHRP)") end if %> is a developer and specialty retailer of gifts. The gifts are sold through The Sharper Image stores, a monthly mail-order catalog, and other marketing channels. Products include personal-care items, home furnishings, electronics, apparel, jewelry, and others.

Sharper Image Corp said in May it expects a sales boost from new products in the next six to nine months. For the recently completed first quarter, the total revenues of $36.3 million were virtually even with the $36.5 million in the year-ago same quarter. Total store sales for the first quarter were $25.6 million compared with $26.1 million for the same period a year ago. Catalog sales increased 4% to $9.9 million. The company reported first quarter loss per share was $0.26 compared with a loss of $0.27 for the same period a year ago.

The company said its focus for 1997 is to drive higher sales through a better merchandise mix and inventory, with a longer term commitment to improving the gross margin rate. On a pro forma basis, excluding the 1996 sales of the SPA Collection division, which the company made the decision to close in January 1997, total revenues for the quarter increased by 6% and catalog sales jumped by 25%. Closing the SPA collection was a great idea, as was the plan to focus more on the home furnishings end.

Sales increased for both the core The Sharper Image and Home Collection catalogs during the first quarter. Catalog sales jumped four-fold for the new Home Collection catalog, along with a 3% sales increase for The Sharper Image catalog.

Sales from its stores accounted for about 71% of total revenues. The company operates more than 80 stores in the U.S., and licensees operate eight stores internationally. During fiscal 1995, the company mailed approximately 33 million catalogs to more than 3 million customers. The Sharper Image catalog is also available on the Internet at http://www.sharperimage.com and there is a site here at AOL. Shares of the Sharper Imaged closed today at $3 1/4.

BROOKSTONE (Nasdq: BKST) is a nationwide specialty retailer offering an assortment of consumer products. The stores are usually located in high-traffic regional shopping malls, and feature consumer products that are both functional and distinctive in quality and design.

Merchandise includes personal-care products, yard and garden tools, household products, leisure and recreational products, and specialty tools. The company also operates a mail-order-catalog business for hard-to-find tools and other household products. The catalogs are named Hard-To-Find Tools and Collection. Gardeners can look to the Brookstone catalog for an ergonomic five-piece gardening set of cultivator, fork, planter, trowel and narrow weeder. I was in Brookstone and was told it was the hottest seller for Father's Day.

At the end of May the company announced results for the first quarter of fiscal 1997 ended May 3, 1997. For the three months ended May 3, 1997, the company reported net sales increase of 7.7% for the first quarter of 1996, reflecting a comparable store sales increase of 2.4%. The net loss for the first quarter was $0.48 per share compared to a net loss of $0.45 per share reported in the same period last year.

Michael Anthony, President and Chief Executive Officer, commented, " Due to the strong seasonality of our sales, stores opened during the previous fiscal year have had a significant negative impact on the losses that we experienced in the first and third quarters of the subsequent fiscal year. However, during the first quarter of fiscal 1997, we were able to leverage our operating costs and mitigate the impact of those new store costs. In addition, new product introductions continue to drive same store sales."

The company sells its products through 162 stores in 34 states. Stock traded at $9 on thin volume at the close of the day's session.

Lastly if you want to see a bunch of catalogues all at the same time, this next company is for you. It is a really interesting retail story.

SKYMALL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SKYM)") else Response.Write("(Nasdaq: SKYM)") end if %> is the largest in-flight catalog company in the United States that makes high quality products and services available to more than 375 million airline passengers per year. The company markets and sells a broad selection of high quality merchandise provided by participating merchants, including major catalog companies and specialty retailers such as Brookstone, Frontgate, Hammacher Schlemmer, The Sharper Image and Wine Enthusiast.

The company places more than 1 million catalogs a month on Amtrak and 18 airlines (which each earn a commission on catalog sales). The SkyMall catalog features more than 1,000 top-selling products from the likes of, Disney, Hammacher Schlemmer, Compaq, Mattel, and the Metropolitan Museum of Art. The company reports that the SkyMall's 24-hour, toll-free lines take between 2,000 and 6,000 calls a day.

Chairman and cofounder Robert Worsley got the idea for SkyMall in 1989 when he saw an in-flight catalog offering novelty gifts and thought he could improve on the concept by having orders delivered at the airport when customers landed. SkyMall started in 1990. Worsley began setting up warehouse and airport distribution sites, and by 1991 SkyMall had catalogs on five major airlines. But distribution became a nightmare and warehousing was a mess. SkyMall lost $10 million in 1992 and $6 million in 1993. Amtrak began carrying the company's catalogs in 1994. Facing bankruptcy, Worsley re- invented his company as a publisher of an in-flight catalog-of-catalogs by charging retailers about $20,500 a page. It hired Hammacher Schlemmer to handle its database, fulfillment, and other logistical operations; closed its airport sites; sold its inventory of merchandise; and got its payment schedule reduced.

By 1995 SkyMall had reached profitability. The company placed catalogs on its first foreign airline, JAL, in 1996. That year SkyMall reached out to a different kind of traveler when it began offering its catalog services on the Internet. SkyMall went public in late 1996. Presently, the company has exclusive agreements to place its catalogs in aircraft seat pockets on airlines which carry approximately 70% of all domestic passengers, including America West, Continental, Delta, Southwest, TWA, United and US Airways.

Last week LODGENET ENETERTAINMENT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LNET)") else Response.Write("(Nasdaq: LNET)") end if %> and SkyMall Inc. announced that they have entered into an agreement to begin offering interactive shopping services in more than 250,000 hotel guest rooms served by LodgeNet's proprietary b-LAN (broadband local area network) system.

This on-screen shopping service will be offered under the SkyMall brand name, and allow hotel guests to access from their hotel rooms a video version of the SkyMall shopping service. The two companies said "We estimate this venture with LodgeNet will put SkyMall in front of approximately 50 million guests during the first year after introduction, and on a very cost-effective basis." Since one would hope that no one knows better than SkyMall about merchandising to the traveler, it appears to be a great fit.

Sales have steadily increased. In 1991 sales were $5.4 million and in 1996 rose to $43.7 million. The company only had 8.7 million shares outstanding and has an EPS of $0.38 cents up from $0.14 cents in 1995. The shares closed today at $8 1/4.

BLUE CHIP RETAILER RALPH LAUREN GOES PUBLIC

Shares of Ralph Lauren, which were priced at $26, gapped up on the first day of trading and closed at $31 1/2. Over 19 million of the 29.5 million shares were traded. A special collection of facts, and articles are available at the following link. Rather then repeating myself I invite our readers to click and peruse our Ralph Lauren Collection, 06/12/97: Polo Ralph Lauren IPO

ALTERATIONS

WOOLWORTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: Z)") else Response.Write("(NYSE: Z)") end if %> hit a 52-week high Thursday as Brown Brothers Harriman & Co. started coverage of the stock with a short-term "hold" and a long-term "outperform" rating.

In a research note Thursday, the firm said that in fiscal 1997 the company's management "continued to make meaningful progress in its cost-reduction/efficiency-improvement efforts." They also noted that the retailer's 1 cent profit in the first quarter was the first time in years that the company recorded a profit during the seasonally slow first quarter, and compared it with a loss of $0.17 per share in the prior year's first quarter. It was estimated Woolworth will earn $1.64 a share in fiscal 1998. Last year, the company earned $0.59 a share, after items. The analyst forecasts Woolworth's three-to-five year growth rate at 20%.

The company is planning to open of about 400 new stores although overall revenue in 1997 is expected to remain flat, according to the investment house. It is believed that Woolworth may continue to sell at a multiple discount to its projected growth rate. According to the analyst firm, they expect "a 20% growth rate, the multiple yardstick is 16, thus yielding a roughly $26 price target and the "hold" rating. Looking ahead to next year, a multiple of 16 yields a price target close to $33, given an 1999 estimate of $2.05 a share."

Hambrecht & Quist Inc. initiated coverage of AMAZON. COM (Nasdq: AMZN) with a "buy" rating on the Internet-based book retailer. In a research note Tuesday, the brokerage firm estimated Amazon.com will post a loss of $1.23 a share in fiscal 1997 and a loss of 94 cents a share in fiscal 1998.

Bears Stearns & Co. raised SEARS ROEBUCK AND CO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> to "buy" from "neutral." The analyst noted that the company's core business continues to do well, adding that he believes the situation regarding its settlement of civil cases regarding bankrupt customers is overdone. The firm expects 15% earnings growth for Sears going forward, and said the shares are trading at a discount to the market.

Smith Barney Inc. raised the firm's rating on TALBOTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLB)") else Response.Write("(NYSE: TLB)") end if %> and THE GAP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> to "buy" from "outperform." Goldman Sachs initiated coverage of the athletic shoe maker CONVERSE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVE)") else Response.Write("(NYSE: CVE)") end if %> with a "market outperformer" rating.

Remember your plastic -- "We never leave Fooldom without it."

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