IndustryEye: Catalogers’ Updates, People on the Move & Letter to the Editor

Catalogers’ Updates

Outdoor co-op cataloger Recreational Equipment Inc. (REI) in February said that $58 million will be distributed to its active members through its annual patronage refund based on the co-op’s 2006 sales of $1.18 billion. This is the second consecutive year in which sales rose more than 15 percent. Anyone can shop the REI catalog, Web site and stores, but only members share in the co-op’s profits. A total of 3.1 million active REI members received their patronage refunds calculated at 10 percent of their eligible 2006 purchases.

Never Been Stronger
In addition, based on 2006 results the outdoor retailer will dedicate $3.6 million through its grants program in support of conservation and recreational access around the country in the coming year. “The financial health of REI has never been stronger,” said CFO Brad Johnson in a statement.

For the year, REI’s operating income in-creased 22.8 percent from $86 million to $105.5 million, and net income increased from $32.7 million to $40.3 million, or 23 percent. Sales for the company’s catalog and online unit jumped by 19 percent. REI’s comp store sales rose by 9.5 percent.

People on the Move

Lillian Vernon: Robert Eveleigh has been hired as EVP and CFO for this general merchandise cataloger. He previously served as CFO of C. Lloyd Johnson Co., which sells consumer goods to the military. Additionally, Joan Sobyak has joined Lillian Vernon as divisional merchandise manager. She’ll oversee the product assortment, development and day-to-day process for the main catalog. She served most recently as merchandise manager for the Miles Kimball Co.

Letter to the Editor ...

Dear Editor,
In your article about buying your own paper (Strategy, “Should You Purchase Your Own Paper?” January 2007), I disagree with your premise. I’ve been in the paper and printing business for 30 years. To advise people to buy their own paper at the levels you suggest is not efficient. Forty tons x $750/ton = $30,000. Saving 3 percent is $900.

This is hardly worth the time and risk of being disadvantaged by a broker or merchant with respect to pricing, handling charges the printer rightfully may impose, along with storage and inventory costs. Paper through printers at less than multithousand-ton levels makes sense. The old saw that printers are predatory when it comes to paper prices (to their customers) is most often not true, as evidenced by the number of them closing their doors and the rest often featuring dismal profit levels.

I believe your article was not great advice.

Eric Ophoff
Vice President
Abitibi Consolidated

The Author’s Response
I appreciate and respect the opinion offered by Mr. Ophoff from Abitibi, a paper manufacturer. I wrote my article for the end user, i.e., the cataloger, and not from a paper supplier’s point of view. I don't believe Abitibi manufactures papers in the No. 5 through No. 3 range that most catalogers use. It produces primarily uncoated and SCA paper (usually bought by catalogers in the “multi thousand tons” area).

The 2 percent discount isn’t commonly offered on these types of paper. If someone offered you a $900 savings on a $30,000 car, would you take it? I'd think every dollar would count, especially for smaller mailers. The extra paper inventory can be good, because it can be rolled into subsequent jobs if you use the same paper.

It’s not worth buying your own paper on such a small order, as he is suggesting. The barrier should probably be closer to 500,000 lbs. to consider buying your own.

Stephen R. Lett,
President,
Lett Direct