ShopNBC saw sales slip 4 percent in the third quarter as it shifted its product mix and lowered its average selling price, but the beleaguered No. 3 home shopping network substantially cut some of its losses, the company reported Wednesday.
Third-quarter revenue was $119.4 million versus $124.8 million in the same period last year, as ShopNBC intentionally lowered its average selling price by 49 percent and increased unit volume by 90 percent. Net average selling price was lowered to a record $95 during the quarter versus $187 in the year-ago quarter.
Adjusted EBITDA was a loss of $5.6 million compared to a loss of $13.3 million in the year-ago period. The net loss for the third quarter was $12.9 million compared to a $20.8 million for the same quarter last year.
Customer trends continued to improve with new and active customers up a record 118 percent and 64 percent, respectively, in the third quarter.
Increased customer demand in the quarter led to a 4 percent growth in net orders over last year, the company’s first increase in seven quarters. This is an acceleration of the company’s first half performance of new and active customer growth of 60 percent and 29 percent, respectively.
Return rates for the quarter were 21.9 percent versus 29.2 percent in the year-ago quarter, reflecting improvements in delivery time, customer service, product quality, and lower price points. The customer service contact rate decreased 24 percent in the quarter.
ShopNBC’s Gross profit margin was 33.2 percent, 130 basis points lower compared to last year, driven primarily by increased promotional activity. These promotions contributed to the significant new customer growth the company achieved in the quarter.
ShopNBC noted that it had added a record 122 new vendors to the new and existing merchandise categories of home, fashion, beauty and jewelry.
The company launched 58 new show titles, product categories and brands in the quarter, such as Suzanne Somers, Esprit Outerwear, Laundry by Shelli Segal, Sensual Solutions by Dr. Robert Rey, Sensa Weight-Loss System, Brilliante Purely Platinum, the Culinary Institute of America and Griot’s Auto Care.
And a record 103 new guests, 90 of those being experts in their field, were added to the network’s talent ranks, including the hottest celebrity hair stylist Ted Gibson, chef Marcus Samuelson and shoe expert Meghan Cleary.
Operating expenses were trimmed $12 million year-over-year or 20 percent in the quarter. This decrease was driven by broad-based reductions in the company’s cost structure, including lower cable and satellite fees, lower headcount versus the prior-year period, and a significant decline in transactional costs in the areas of order capture, customer service, credit and fulfillment.
In the quarter, ShopNBC successfully concluded all of its carriage agreements that were up for renewal in the last year while preserving 100 percent of its distribution footprint of 73 million homes, leading to a cost savings of about $24 million in 2009 and improved channel positions in many markets.
“Merchandising efforts to unlock our customer growth potential showed real signs of progress in the third quarter, as we build new businesses in strategic product categories,” ShopNBC president and CEO Keith Stewart said in a prepared statement.
“Record gains were made in new and active customer counts,” he said. “Net shipped units were at record levels. E-commerce is proving to be a powerful complement for additional growth. With a focus on delivering a premium shopping experience across our multichannel platform of TV and the Web, the customer is reacting strongly to our initiatives.”
Stewart added, “Year-to-date EBITDA, as adjusted, is $18.2 million better than last year. We are highly focused on delivering the high expectations that have grown during the turnaround of ShopNBC. I remain confident about our fourth quarter plans.”