ValueVision Media, ShopNBC’s parent, reported disappointing third-quarter results Wednesday, with net sales increasing 2 percent to $135 million.
Gross profit at the No. 3 home shopping network rose 6.8 percent to $50 million; gross margin rose to 37.2 percent; and Internet-sales penetration increased to 44.1 percent.
ShopNBC had previewed these results earlier this month.
“As previously reported, lower than expected Q3 net sales and adjusted EBITDA is a disappointing setback in our progress toward rebuilding the business,” ShopNBC CEO Keith Stewart said in a canned statement.
“Third-quarter sales were principally impacted by a sales shortfall of 20 percent in consumer electronics along with a greater than anticipated decline of 13 percent in sales of watches, which off-set double-digit sales gains and strong margins in our jewelry, home, health and beauty and fashion and accessories categories.”
Here is the rest of Stewart’s excuses.
“We are focused on improving the consumer electronics business with specific action plans under way,” he said. “This includes recruiting new talent and expanding its merchandising team as well as improving product and brand assortment. The number of new vendors across our other categories continues to grow, as our multichannel retail business presents an attractive sales platform to expand their business and brand visibility. We expect to further reinforce that trend with additional prominent brands, such as Brooks Brothers and Hartmann luggage, that will delight the customer and further differentiate ShopNBC.”
ShopNBC reported an Adjusted EBITDA loss of $0.5 million on lower than anticipated sales. In addition, Adjusted EBITDA was impacted by additional TV distribution costs related to a 5 percent increase in average homes and improved channel position in certain markets. It is important to note that investments in distribution help drive increased customer penetration and can take several quarters before they become fully productive.
ShopNBC CFO William McGrath chimed in.
“Our balance sheet remains solid with cash and cash equivalents, including restricted cash, of $32.7 million in Q3 ’11 versus $42.5 million in Q2 ’11,” McGrath said. “The decrease in cash reflects planned increases in inventories in advance of the holiday season, continued use of ValuePay as a cost-effective promotional tool, and normal IT-related investments in capital expenditures.”