Evine Sales Dive 16% in 1Q, Cans 11 Top Execs As Part of Blood Bath, Back To ShopHQ

We bet Evine is glad its first quarter is over. But the execs who got pink slips we’re sure are not happy. Oh, and the name is also going back to ShopHQ. And there’s going to be Shop Bulldog channel for men, and a new Spanish-language one, too.

It’s a lot to digest.

First of all, the No. 3 home shopping network saw its sales nosedive 16% in the first quarter, to $131.5 million versus the prior year. It also suffered a net loss of $21 million, compared to net loss of $3 million in the prior year.

New CEO Tim Peterman, who rejoined the company earlier this month, wasted no time wielding the ax. In one of the worst corporate-speak euphemisms we’ve ever heard, he called the network’s mass layoffs “a cost optimization event” that will eliminate $15 million in annual overhead costs.

“This event included a 20% reduction in non-variable workforce and the permanent elimination of the following 11 senior executive roles: EVP, Product Sourcing & Business Development; EVP, Managing Director of Brand Development; EVP, Chief Human Resources Officer; SVP, Chief Merchandising Officer; SVP, Chief Accounting Officer; VP, Site Merchandising & Customer Analytics; VP, Customer Operations; VP, GMM Home; VP, Planning; VP, Marketing; and VP, GMM Beauty,” Peterman said in a statement.

As for the name change, here we go again.

“In the second quarter, we are planning to change the name of the Evine network back to ShopHQ, which was the name of the network in 2014,” Peterman said. “ShopHQ is easier to recognize for existing television retailing customers, who spend over $9 billion annually with television retailers in U.S. We believe this more intuitive and recognizable name will allow us to better promote to our network and build our customer file again. Our conclusion from the review of the customer impact data related to the change to Evine in 2015, was that it was not positive.”

Peterman made no excuses for the network’s performance, since he wasn’t responsible for it.

“I am excited to rejoin Evine as its new CEO,” Peteman said. “Although we have only been working as a team again for less than a month, we have already identified the primary causes for Evine’s dramatic financial declines these last few quarters and begun to implement focused remediation actions.”

“In terms of our first quarter, 2019 performance, there is no other way to say it – our performance was poor.”

No sh-t.

“In fact, our performance over the past three quarters has significantly missed expectations, and we must perform better for our shareholders and employees,” Peterman said. “Our plan to reverse our recent negative financial trend is clear, exciting and already in motion.”

This has included hiring Jean Sabatier for the new post of executive vice president, chief commerce officer.

“This is an important change expected to re-establish operating fundamentals in pricing, merchandising, programming and planning,” Peterman said. “Jean rejoins the company after having served as SVP, Sales & Product Planning and Programming from 2008 to March 2017. Most recently, Jean has served as a planning and programming consultant in both Germany and Italy to HSE24, an omnichannel retailer.Prior to joining Evine in 2008, Jean spent 11 years at QVC.”

Peterman added, “We are optimizing the current merchandising mix to drive better customer engagement and immediately improve our merchandising margin and shipping margin. We expect this changed mix will lower our variable costs as a percentage of revenue. This is a cornerstone remediation effort that we anticipate will create an increase of 5% to 7% in the airtime mix of our strongest categories of jewelry, beauty, wellness and watches, and a corresponding decrease of 5% to 7% in the airtime mix of our lowest performing categories of home and fashion.”

Peterman also cited the $11 million in additional working capital it’s freceived via Invicta Watch Group investment transaction.

“We secured the services of Eyal Lalo, as our new vice chairman, and we expect he will help us reignite our vendor community with passion while also helping us find and launch new vendors to strengthen our product assortment in all of our merchandising categories,” Peterman said. “This is also a cornerstone of our remediation effort. In the last three years, Evine has not launched a single brand that has exceeded $10 million in annual revenues. Eyal is already making a difference for us in this area.”

Here’s the new interactive media game plan:

Using our “service fee” business model:

Expanding Evine’s existing 3PL service offering. In 2017, Evine launched its 3PL services business unit and signed its first customer, G-III Apparel Group, in 2018 with brands such as Karl Lagerfeld Paris, DKNY and G.H. Bass.

This year we expect to add customers and expand our service offering to provide a “one-stop commerce services offering” targeting brands interested in propelling their growth using our unique combination of assets in television, web and 3PL services. We will also seek to add services in the AdTech space monetized with advertising and fees.

Using our “advertising & eCommerce” business model:

Shop Bulldog: In Q4 of 2019, we expect to rebrand our existing Evine Too channel into a new omnichannel, television shopping brand called Shop Bulldog (“SB”) that will sell and advertise men’s merchandise and services, and the aspirational lifestyles associated with its brands and personalities.

Although SB will be produced in Minnesota at the corporate headquarters like our ShopHQ channel, SB will not be associated with ShopHQ from a branding and creative perspective. Our unfair advantage in executing this strategy is our existing strength in watches and male customers in television retailing.

LaVenta: In Q1 of 2020, we expect to launch a new omnichannel, Spanish language, television shopping brand centered on the Latin culture to sell and advertise merchandise, services and personalities, celebrating aspirational lifestyles.
LaVenta will be produced in Miami by a standalone Latin management team. We also have a compelling unfair advantage to build this new offering – the top three shopping categories in the Latin culture are beauty, watches and jewelry – our core strengths.

Evine to Post 1Q Earnings June 5

Evine, which recently announced it is getting a financial infusion from vendor Invicta, will release its first-quarter results June 5 before the market opens.

Newly named CEO Tim Peterman, Chief Financial Officer Diana Purcel and Michael Porter, vice president of finance and investor relations, will host a conference call later that morning at 8:30 a.m. to review the results.

If you want to listen in on the conference call dial 1-877-407-9039 or 1-201-689-8470 (international) at least five minutes prior to the call.

There will be a simultaneous audio webcast available at: https://event.on24.com/wcc/r/1824050/F5231464052A1FF8BBB9E0E2A1248D25

A replay of the conference call will be available on the company’s website for a limited time.

Combined QVC-HSN 1Q Sales Drop 4%, to $1.9 Billion

QVC’s and HSN’s combined revenue slid 4% in the first quarter versus last year, to $1.9 billion, in a performance that even Mike George couldn’t put a good spin on.

The two domestic home shopping networks, merged in a unit named QxH by their parent Qurate Retail Inc., for the first time reported their sales as one entity.

“Our first quarter performance was disappointing amidst a changing retail and media landscape,” George, president and CEO of Qurate Retail, said in a canned statement.

“Our recent results have been more variable as we navigate the evolution of our business model and the integration of HSN, fine-tune our investments, and strike the right balance between sensible revenue growth, margin expansion, new customer acquisition and our strategic initiatives,” he said.

“We are taking a disciplined approach, investing in initiatives to drive high-quality customer growth and engagement, broaden and deliver our assortments, particularly across new digital platforms, and optimize our fulfillment network. Our customer fundamentals remain strong, including customer count, retention and purchase frequency. We are confident we are taking the right actions to deliver attractive operating margins and free cash flow for the long-term.”

So what happened?

QxH experienced sales declines in home, jewelry and beauty, which were partially offset by gains in electronics with modest growth in fashion (apparel and accessories), according to the first-quarter press release.

QxH enjoyed strong sales growth in off-air products; however, these gains were not sufficient to offset lower sales of on-air items.

“Operating income and adjusted OIBDA margin) contraction was primarily due to higher inventory management costs, fulfillment and marketing expenses, which were partially offset by lower TV distribution commissions and higher product margins,” the press release said. “Lower TV distribution commissions at QxH are in part due to the accounting treatment for certain renewed HSN carriage agreements (described below). Operating income also included higher amortization expense related to the amortization of HSN carriage agreements.”

Starting in the third quarter last year, HSN began renewing TV carriage agreements with several distribution partners, which provided multiyear upfront payments that are amortized over the life of the agreements, versus its previous convention of expensing quarterly payments as incurred, according to the press release.

This accounting change has a positive impact on QxH’s adjusted OIBDA with a corresponding increase in QxH’s amortization expense, which is neutral to operating income each period and cash neutral over the life of the agreements.
Roger that, if you have an accounting degree.

If you want to hear the juicy details, Qurate Retai President and CEO Mike George and Executive Chairman Greg Maffei, will discuss the earnings on a conference call which will begin at 8:30 a.m. (E.D.T.) on this Friday, May 10. The call can be accessed by dialing (800) 458-4121 or (323) 794-2093, passcode 3078914, at least 10 minutes prior to the start time. The call will also be broadcast live across the Internet and archived on our website.

To access the webcast go to http://ir.qurateretail.com/events-and-presentations. Links to this press release and replays of the call will also be available on Qurate Retail’s website.

Evine Now Really Is The Invicta Network

We were on vaca in AZ when this blockbuster news broke about Evine. Home shoppers have often joked that Evine is the Invicta Network, but little did they know that it was actually going to happen.

Last week financially struggling Evine announced that a group of investors — including Eyal Lalo, CEO of Invicta Watch Group and Tim Peterman, former Evine COO and CFO — were buying $6 million of the network’s stock.

As part of the deal Invicta, a huge Evine vendor, has committed to invest an additional $25 million in product for the home shopping channel.

Peterman was also named Evine’s CEO.

There were a host of other changes detailed in the press release is below.

As former QVC host Steve Bryant pondered, it looks like Invicta got a real steal on Evine. Steve pointed out that there’s been talk that Amazon is looking to have a home shopping channel, and buying Evine would have given them a great base — distribution deals in place already, etc. And we are sure Jeff Bezos has a couple of million dollars he could have spent to buy Evine — that’s chump change to him.

Now we don’t know if you can expect to see even more Invicta watch segments on Evine, but we have the sneaking suspicion that you will.

Evine Secures Multi-Million Dollar Strategic Investment & Exclusivity Commitment from The Invicta Watch Group; Tim Peterman Returns as CEO
05/02/2019
Eyal Lalo, CEO of The Invicta Watch Group, joins Evine’s Board as Vice Chairman; Bob Rosenblatt remains on the Evine Board.

MINNEAPOLIS, May 02, 2019 (GLOBE NEWSWIRE) — Evine Live Inc. (NASDAQ:EVLV), a multiplatform interactive video and digital commerce company (evine.com), today announced as a part of its ongoing strategic alternatives review, the execution of several agreements with its largest and most tenured vendor, The Invicta Watch Group (“IWG”). Effective immediately, Evine has:

Sold $6 million of common stock at $0.75 per share, which was priced at a 97% premium to Evine’s closing stock price on the day prior to signing the purchase agreement, to investors (“Investors”) that include, among others, Eyal Lalo, CEO of IWG and Tim Peterman. The investors will also receive five-year warrants to purchase an aggregate of 3.5 million shares of common stock with an exercise price of $1.50 per share, a 295% premium to Evine’s closing stock price on the day prior to signing the purchase agreement;
Secured a $5 million increase in its vendor line for IWG’s family of brands, subject to adjustment from time to time;
Secured IWG’s commitment to invest an additional $25 million in product for Evine in 2019;
Secured a 5-year TV retailing exclusivity commitment from IWG;
Appointed Eyal Lalo, CEO of IWG, as Evine’s Vice Chairman, which is a board role designed to work closely with the CEO in the operations of the business;
Appointed Tim Peterman, Evine’s former COO & CFO, as its new CEO;
Appointed Michael Friedman, a long standing IWG partner, to Evine’s board; and
Announced that Bob Rosenblatt, Evine’s former CEO, will remain on Evine’s Board, where he will assist in the transition and continue to contribute to Evine’s strategy as a Board member.

Bob Rosenblatt, former CEO of Evine, said, “It is exciting to have Tim back to lead Evine on its continuing journey to profitability while utilizing his strong experience and relationships in interactive media and eCommerce to help us chart a compelling growth strategy. In addition, Eyal’s financial commitment as an investor and his leadership as Vice Chairman will help us accelerate our brand building opportunities and strengthen our balance sheet. I couldn’t be more excited as a board member and shareholder to have Tim and Eyal helping lead our organization into its next chapter.”

Tim Peterman, CEO of Evine, said, “I look forward to working with Bob and his team during a collaborative transition. We have a great company today, and I believe we have a very bright future. As Bob knows, our vision for the company remains fundamentally unchanged; I look forward to working with the team and the Board on new growth strategies and expect to have further details on such strategies in the near term.”

Eyal Lalo, Vice Chairman of Evine, said, “Fostering an entrepreneurial, fast-moving culture in which leaders and employees work to produce amazing results will be an important strategic priority for us. Tim and I look forward to playing a more active role in Evine’s future.”

In addition to Eyal Lalo and Michael Friedman joining the Board, Thomas Beers and Mark Holdsworth have resigned from the Board, effective today.

Landel Hobbs, Chairman of Evine, added, “Deepening our relationship with IWG adds value for both the company and its shareholders, especially as Evine continues to chart its course in the role of interactive video commerce in the future of retail, entertainment and media. In addition, Tim’s strong experience and relationships in interactive media and eCommerce will help us continue to chart a compelling growth strategy and the deep expertise that Eyal brings to the Board will further enhance our strategies and execution. On behalf of Evine and the Board, I would also like to express my deep gratitude to Bob Rosenblatt for his leadership during the last three years—we have been made stronger through his work and look forward to his continuing contributions as a member of the Board. Similarly, I extend our thanks to Thomas Beers and Mark Holdsworth for their dedicated and valuable service on our Board.”

Evine will grant performance stock units representing 680,000 shares of Evine common stock to Mr. Peterman on May 2, 2019, that were approved by the human resources and compensation committee of its Board as a material inducement to employment. The equity awards were approved in accordance with Nasdaq Listing Rule 5635(c)(4). The performance stock unit grant shall vest one-third upon the one year anniversary of the grant date, one-third when the per-share closing price of Evine’s common stock reaches or exceeds an average trading price of $2 for 20 consecutive trading days and Mr. Peterman has been continuously employed for at least one year from the grant date, and the remaining shares when the per-share closing price of Evine’s common stock reaches or exceeds an average trading price of $4 for 20 consecutive trading days and Mr. Peterman has been continuously employed for at least two years after the grant date, and shall otherwise be subject to the terms and conditions of the applicable award agreement.

Former HSN Host Chris Scanlon Charged With Felony

Here’s some pretty shocking and sad news about former HSN host Chris Scanlon.

One of our readers tipped us off to this report that Scanlon had been arrested in Florida.

https://www.wtxl.com/news/local-news/former-hsn-host-chris-scanlon-arrested-in-leon-county

The story said Scanlon, now 59, was arrested and was being held in a detention center on multiple felony warrants.

WTXL reported that she was accused of “being a fugitive from justice for multiple felony counts related to theft, forgery and tax evasion.”

Scanlon faces two charges of felony theft, two charges of felony forgery and a felony tax evasion charge out of Routt County, Colorado. She was arrested at her Tallahassee apartment last week, according to WTXL.

When the story appear, Scanlon was being held in jail on a $10,000 bond while awaiting extradition.

Scanlon left HSN in fall 2011 to move to Colorado, where her husband was a ski instructor. We don’t know what happened since then, but this is unfortunate.