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The Spiegel Group Reports August Sales

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Comments on Earnings Expectations for Third and Fourth Quarters of 2001

The Spiegel Group today reported sales of $188.7 million for the four weeks ended August 25, 2001, a 9 percent decrease from sales of $208.2 million for the four weeks ended August 26, 2000.

For the thirty-four weeks ended August 25, 2001, total sales declined 5 percent to $1.635 billion from $1.726 billion in the same period last year.

The company also reported that comparable-store sales for its Eddie Bauer division decreased 11 percent for the four-week period and 10 percent for the 34-week period ended August 25, 2001.

Sales results by division for the month of August were as follows: sales declined 6 percent at Eddie Bauer, 12 percent at Newport News and 15 percent at Spiegel.

Sales results by channel for the month were as follows: retail store sales declined 7 percent and direct sales fell 11 percent. Direct sales reflect a 60 percent increase in e-commerce sales and a 21 percent decrease in catalog sales.

Commenting on its earnings expectations for the third quarter ending September 29, 2001, the company said that as a result of continued sales weakness in its merchandising companies and higher than anticipated charge-offs in its private-label credit business, third quarter earnings are now expected to be between a loss of $0.05 to $0.10 per share. Revenue for the third quarter is forecasted to be down approximately 6 to 9 percent compared to last year. The company's most recent guidance called for earnings of $0.10 per share, which was even with the prior year's third quarter.

The company also lowered its outlook for the fourth quarter, noting that earnings forecasts are particularly difficult given the current weakness in the retail environment.

The company stated that earnings for the fourth quarter now are expected to be in the range of $0.50 to $0.60 per share, compared to earnings of $0.50 per share in last year's fourth quarter. Revenue is expected to be flat to slightly up for the quarter, with guidance of minus 3 to 5 percent for Eddie Bauer comparable-store sales.

"Each of our merchant companies made conservative inventory commitments going into the fall season," said Jim Cannataro, executive vice president and chief financial officer of The Spiegel Group. "We will continue to focus on tightly managing inventory levels, taking the necessary steps to keep inventories current. In our Eddie Bauer division, we have taken aggressive markdowns to move prior season product and have a clear presentation of the new fall product.

"Eddie Bauer's revamped product offer and marketing strategies debuted in stores this week. We continue to expect these changes to deliver higher sales productivity as we move forward. This remains a key assumption in our fourth quarter earnings forecast, although we have adjusted our expectations due to the uncertain economic environment. Our prior earnings estimates assumed somewhat improved economic conditions in the second half of the year, which we have yet to see.

"After seeing positive delinquency trends in prior months, an improvement in customer charge-offs was anticipated in the second half of the year, however, subsequently delinquency rates have increased in our private-label credit business. In reaction, we are implementing more restrictive credit measures aimed at lowering our charge-off exposure and improving the quality of our portfolio, although it will take time for these actions to make an impact. Therefore, we now expect higher charge-offs to negatively affect our earnings in the third and fourth quarters," said Cannataro.

The company previously stated that it expected net pretax gains on the sale of receivables for 2001 to be comparable to the $71 million of net gains reported last year. The company stated that net gains for this year could be somewhat below last year, due to slower than anticipated receivable growth.

This press release contains statements that are forward-looking within the meaning of applicable federal securities laws and are based upon Spiegel, Inc.'s current expectations and assumptions. Words such as "expect," "plan," "believe," "anticipate," and similar expressions identify forward-looking statements. Any such forward-looking statements 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.

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