ShopNBC Posts 5 Percent Rise In Net Sales In Second Quarter

It’s nasty chilly and damp out. We will be up until dawn covering a Montclair Council meeting.

Therefore, this is the best we can do right now on the second-quarter results released Tuesday for ValueVision Media, which we all know does business as ShopNBC. We’ll have to listen to the replay of the analyst conference call.

Most of this is taken directly from the press release.

ShopNBC posted a net sales gain of 4.7 percent in the second quarter, with revenue increasing to $132.1 million from $126.2 million a year ago.

Gross profit rose 8.7 percent from to $51.3 million from $47.2 million, while adjusted EBITDA increased by $3 million, moving from red to black ink.

However, ShopNBC still showed a net loss for the quarter, although it has reduced the red ink. The second-quarter net loss was $4.5 million, versus $7.7 million for the prior year period.

ShopNBC CEO Keith Stewart

“For the fourth consecutive quarter, we posted net sales, gross margin and adjusted EBITDA improvements, including positive adjusted EBITDA,” ShopNBC CEO Keith Stewart said in a canned statement. “I am pleased with the gross margin progress our team continues to make and our ability to be nimble in response to changing consumer preferences. Additionally in Q2, we continued to lead the televised electronic retailing industry in driving sales via the Internet and mobile devices, which were up 23 percent vs. last year.”

CFO William McGrath’s eloquent canned quote was as follows:

“First half 2011 adjusted EBITDA of $4.2 million is the best we have achieved in over five years, and represents a $10.4 million improvement vs. last year. Also during the first six months, gross profit dollars are up double digits and our gross margin rate of 38 percent is a 10-year company record.

Additionally, our national cable and satellite footprint increased by 4 percent vs. last year to approximately 79 million. This powerful mass distribution channel, which is heavily integrated into our Internet and mobile platforms, is a key differentiator of our business and driver of our long-term growth plan.”

Brevity is not McGrath’s strong suit. He also said this:

“We recognize that some variability in quarterly sales performance is to be expected, particularly as we build out our merchandise categories and strengthen our team. During the month of June in Q2, sales and gross profit performance was flat while the months of May and July resulted in 10 percent top line growth and 15% increase in gross profit dollars. Looking ahead, we remain committed to our long-term sales and adjusted EBITDA growth goals.”

ValueVision’s second quarter sales growth was impacted by a temporary mid-quarter shift in consumer demand away from high-ticket, low-margin consumer electronics toward higher margin jewelry and health and beauty products. The shift toward jewelry led to a slight increase in second quarter product returns and lower new customer activity, which are trends normally associated within the jewelry category.

The watch category benefitted from a more diverse product mix and achieved improved productivity per minute with attractive margins, as part of a strategically planned reduction in air-time. Health and beauty sales and margins remained strong in the second quarter, driven by a number of new product launches along with a core base of skincare and beauty tools.

Fashion and accessories achieved growth in sales, margin rate and productivity on the strength of well-received fashion introductions in apparel, handbags and shapewear. Performance in the home category
built on the successes of first quarter product launches, achieving stron second quarter sales in cookware, table top and bedding.

The final canned quote is from ShopNBC President Bob Ayd:

“Overall, we continued to make progress across our product categories in both top line and gross margin rates despite the temporary shift in consumer demand. During the first six months of 2011, our merchandise teams laid a strong foundation with a number of innovative product initiatives that will position us well for the back half of this year. These plans, along with a compelling line-up of high-profile brands, entertaining guests and exciting programming, add to our confidence in growing the business and further driving key operating metrics.”

ShopNBC ended the second quarter with cash and cash equivalents totaling $42.5 million, including $5.0 million in restricted cash and $25 million in long-term debt. As planned, inventory levels rose to $52.7 million as compared to $42.2 million in the first quarter, as the merchandise mix shifted more toward product categories held in the company’s inventory.

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