ShopNBC Takes Its Lumps in 3Q
Revenue Down 32%; Losses More Than Triple
By Mike Farrell -- Multichannel News, 11/18/2008 10:01:00 AM EST
ShopNBC’s woes continued to mount, with sales down 32% and net losses more than tripling to $20.8 million in the third quarter.
While the weak economy played a role in the poor third quarter results, the home shopping network shared the blame for its performance.
“Revenues in the third quarter were disappointing,” chairman and CEO John Buck said in a statement. “While certainly it’s been a tough economy with consumer confidence at historic lows, we take full responsibility for our sales performance. We are in a transition period at the company and working hard to improve the fundamentals of this business for long-term sustained growth.”
ShopNBC’s poor performance comes on the heels of weak sales at rivals QVC Inc. and HSN. QVC’s sales dipped 3% and cash flow plunged 21% in the third quarter, as the economic downturn rocked the largest home shopping network.
At No. 2 HSN the picture was slightly better—revenue fell 1% in the period.
In a statement, Buck said that the company’s board of directors and management recognize the challenges facing the business and are focusing on three strategic initiatives to boost shareholder value: controlling expenses and working capital; executing key operational efficiencies to improve fundamentals and exploring strategic initiatives (including a possible sale) with its special committee of independent directors.
The company said in the statement that it would provide more detail concerning those strategic initiatives on its conference call with analysts Wednesday at 11 a.m. ET.
The results come on the heels of a poor second quarter showing—where sales dipped 26%--that caused some shareholders to call for the sale of the company. Two weeks later the company formed a special committee to investigate its strategic options and hired Minneapolis-based Piper Jaffray & Co. as its financial advisor.
For the quarter, revenue was $124.8 million, down 32% from the same period last year. The company also reported a cash flow deficit of $13.3 million (compared to positive cash flow of $1 million last year) and net losses were $20.8 million in the period, compared to a net loss of $5.7 million in the third quarter last year.
On the positive side, ShopNBC continued to rein in operating expenses—they were down 12% in the period compared to last year—and increased gross margins to 34.5% from 33.7% in 2007.
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