Discovery to Close All Stores, Cut 1,000 Jobs
25% of Work Force to Be Eliminated; Focus to Shift to E-Commerce
By R. Thomas Umstead -- Multichannel News, 5/17/2007 1:03:00 PM
First-year chief executive David Zaslav continued his housecleaning efforts at Discovery Communications Thursday, announcing that the company will shutter all 103 of its retail stores by the end of the third quarter.
The move will eliminate the jobs of 1,000 full-time and part-time employees, or about 25% of Discovery's overall worldwide work force, the company said.
At the beginning of the year, the company employed 4,000 people globally. In February, three top executives were let go in a restructuring. In April, 200 jobs were cut in the company's U.S. networks and education businesses.
The company will look to increase sales of its consumer products through partnerships with large retailers like Toys "R" Us, where it already markets animals, models and other fare. The company also will market through its own DiscoveryStore.com e-commerce business, according to Zaslav.
Discovery has run stores in malls for more than one decade. Executives close to Discovery said the stores generated $130 million annually but reported yearly operating losses of $30 million.
The strategic review of the commerce business was led by financial-services firm J.P. Morgan. Discovery said it will retain liquidator Gordon Bros. Group to handle the shutdown.
"By eliminating our owned-and-operated brick-and-mortar storefronts, which are cost-intensive and complicated businesses, Discovery can focus its efforts on high-growth e-commerce and licensing operations," Zaslav said in a prepared statement.
"While retail is historically not the core competency of global media companies, there is strong consumer demand for Discovery's branded product lines,” he added. “The company's e-commerce operations posted record growth and sales for 2006, and to realize the full value of our quality content, Discovery must also sell through large retailers who have more stores and provide more exposure to a greater number of consumers."
Discovery-branded products such as this month's DVD release ofPlanet Earth will mostly be sold through its e-commerce site, which receives 12 million unique visitors annually.
The company will also reach consumers through Web-based partnerships with Amazon.com and eBay. Overall, Discovery's e-commerce operations posted record growth and sales for 2006 and are up 144% year-to-date over last year, according to the network. But it does not disclose actual revenue or profit numbers for these businesses.
Discovery will also explore new avenues for product sales via television by capitalizing on the company's reach both in the United States and globally, the company said.
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