ShopHQ’s dissident shareholders have renewed their assault on the home shopping network’s current management team, including $1.3 million CEO Keith Stewart, putting up its own slate of directors to oust the incumbents. It looks like a showdown.
On Thursday the Clinton Group filed a proxy statement with the Securities and Exchange Commission with its nominees for ShopHQ’s board — reality TV producer Thom Beers, former HSN head Mark Bozek, Ronald Frasch, record mogul and ex-Mariah Carey hubby Tommy Mottola, Robert Rosenblatt and Fred Siegel.
In pretty brutal language, the Clinton Group skewered Stewart over his tenure at the No. 3 home shopping network.
Keith Stewart in happier days
How do you like these apples, Keith? Here’s a snippet from the SEC filing.
The current Chief Executive Officer, Keith Stewart, was hired by the Company in August 2008 and became Chief Executive Officer in January 2009. In our view, while Mr. Stewart and his executive team have been in place, the business has not grown as projected by the Company nor, in our view, taken sufficient advantage of its opportunities.
During investor presentations in 2009, 2010 and 2011, Mr. Stewart and his team spoke of a future in which the Company would generate $1.1 billion of revenue, or $12 to $13 of revenue per home in which the ValueVision programming was available. However, revenue has not grown to these levels.
Instead, the Company generated just $640 million in revenue in the year ended February 1, 2014 (Fiscal 2013). The Company generated more revenue eight years ago (among other times) when its programming was available in 35% fewer homes.
But in Fiscal 2013 (and throughout Mr. Stewart’s tenure), the Company’s revenue amounted to just $7 per home. On this critical revenue metric, the Company’s current performance is worse than it was during the year Mr. Stewart joined the Company.
And, the Company generated more than $10 of revenue per home in every Fiscal Year from 1999 to 2007, prior to the tenure of nearly all of the current directors and Mr. Stewart.
Moreover, the Company’s current $7 revenue production per home significantly lags behind that of HSN and QVC, the Company’s principal rivals, who generate $24 and $60 of revenue, respectively, per American home in which their programming is available, according to the Company’s latest Management Presentation.6
On measures of profit, the Company has similarly under-achieved its previous performance and its previously announced goals … During Mr. Stewart’s tenure – consisting of 20 reported quarters of earnings – the Company has generated positive net income in just one quarter and has lost a cumulative $145 million. Over the same period, both HSN and QVC have generated significant and increased profits.
And here is what the Clinton Group’s directors plan to do:
* replacing the Chief Executive Officer (namely Stewart)
* changing the mix of merchandise offered to customers, reducing the percentage of merchandise in the jewelry, watch and electronics segments (which have historically been characterized by high selling prices and high return rates), and creating additional vendor relationships with brands and manufacturers in other categories such as beauty, health, fitness, fashion, accessories and home;
* establishing a New York City merchandising presence, enabling greater access to proprietary product from celebrities, musicians, personalities and well-known brands
* broadcasting some live selling events from locations throughout the world, including New York City and Los Angeles, to facilitate the acquisition and development of high margin, proprietary brands and notable, on-air talent
* marketing the SHOP HQ brand and service through public relations, off-asset marketing and through live events, promotions and innovative use of multi-channel, social media
*innovating new programming approaches to distinguish the SHOP HQ brand from those of rivals HSN and QVC (as well as other eCommerce companies), including by adding programming that involves integrated social commerce and cost-effective, shopping-centric entertainment across multiple platforms.
On Friday, ShopHQ shot back with its own SEC filing.
“The Board does not believe the Clinton Group’s nominees or proposals are in the best interests of all of our shareholders and does not endorse any of them,” ShopHQ’s current management said.
“THE BOARD RECOMMENDS A VOTE ‘FOR’ THE ELECTION OF ALL OF OUR DIRECTOR NOMINEES NAMED ON THE ENCLOSED WHITE PROXY CARD AND URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY OR ON BEHALF OF THE CLINTON GROUP,” ShopHQ said in its filing.