Harry & David sees spike in revenue, profits

Although it had fewer retail stores, Harry & David reported increased sales in the stores it kept along with increased revenue and profit across the company during the 2012 holiday season.Mail Tribune / Julia Moore

Harry & David Holdings reported increased revenue and profit during its pivotal holiday sales period, the second Christmas season since the Medford-based gift and gourmet food company emerged from bankruptcy protection in September 2011.

In its fiscal second quarter that ended Dec. 29, Harry & David saw revenue climb 4.3 percent to $254.8 million from $244.3 million a year ago. Net income rose 23.4 percent to $41.7 million from $33.8 million a year ago.

"Despite a much tougher holiday selling environment than expected, we are especially pleased with the significant growth in our customer file as it validates the return of the business to a growth trajectory," Chief Executive Officer Craig Johnson said in a press release announcing the results. He said website enhancements and display changes for mobile and tablet sites contributed to the improved results.

While retailers across the country fell short of expectations, Harry & David managed to sidestep the more fickle brick-and-mortar shoppers, while participating in online sales's 11 percent growth.

"It was a very long holiday season and it appears to influence how consumers purchased during that period of time," said Chief Financial Officer Michael Schwindle. "I think we did a bit better than the NRF (National Retail Federation) expectations. Our order growth was 16 percent above the orders placed at Harry & David during the same six weeks between Thanksgiving and Christmas last year."

While other national retailers didn't meet expectations, they generally reported solid holiday revenue. Schwindle said the story could be different for some of them when earnings reports come out in the next few weeks. The big early rush around Thanksgiving gave way to a four-week lull before shoppers swooped in on last-minute discounts.

"It's one thing to have top-line (revenue) growth and another to see it on the bottom line," Schwindle said. "The challenge for the retailer is not to pull the discount lever."

Harry & David carried a $72.1 million cash balance into January and had $98.5 million available on its credit line.

"That's a great place to be," Schwindle said. "I'm very pleased at the position we're in and it bodes very well for the upcoming season, allowing us to do what's needed to build product, harvest fruit and build assortments."

For the quarter, Harry & David's direct marketing — catalog and online — sales grew by $14.8 million, or 7.4 percent.

The company's retail stores saw a year-over-year revenue decrease, directly related to the closure of 13 stores in the past year. The $32.5 million in sales was down from $35.9 million.

However, same-store sales, including e-commerce, saw a 5.8 percent gain.

Schwindle said there were two notable developments during the quarter: The customer base grew and the company's temporary stores achieved their purpose.

"Our active customer list grew 11 percent," he said. "We've talked about our need and drive to grow our customer file. It's easiest to market to customers you know, while prospecting for the customers you don't know is both more difficult and more expensive. We're excited about what it means for the future."

Wholesale revenue — from products sold to other retailers — also fell to $8.9 million from $9.7 million. The company said the wholesale figures were down because earlier shipments pushed some sales into the first quarter.

Both the stores and wholesale arenas had gains over the first half of fiscal 2013 as the company saw revenue grow to just more than $288 million from $251.1 million during the first half of fiscal 2012.

Reach reporter Greg Stiles at 541-776-4463 or email business@mailtribune.com. Follow him on Twitter @GregMTBusiness, and read his blog at www.mailtribune.com/Economic Edge.

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