The hits keep coming to home shopping networks in the third quarter, and we don’t mean that in a good way.
Evine, the No. 3 channel, released its earnings on Tuesday, and its announcement “buried the lead,” as we say in journalism, about the sales drop. Net sales declined 7 percent, to $152 million.
The good news is that Evine stopped some of the flow of red ink during the quarter,
Its net loss was $3.9 million, a 25 percent improvement year-over-year, with adjusted EBITDA of a positive $2.5 million, a 1,400 percent improvement year-over-year. Gross profit as a percentage of sales increased 210 basis points to 36.6 percent compared to 34.5 percent in the third quarter of last year.
All the major home shopping networks took a beating in the third quarter, with QVC seeing its revenue dive 6 percent, to $1.3 billion, just a day after HSN reported that its sales had slid 3.5 percent, to $569.7 million.
The only one to have an upbeat report was Jewelry Television, which said that its third-quarter sales rose 10.6 percent.
“I’m pleased with our progress as we continue to improve profitability through a disciplined merchandising mix that prioritizes contribution margin,” Evine CEO Bob Rosenblatt said in a canned statement.
“For consecutive quarters, we have been expanding our gross margin rate, improving our cash position, lowering our net loss and improving our EPS by refining our mix of compelling merchandise, focusing on our most successful product categories, and engaging our valued customers via a personal shopping experience.”
Bob had quite a bit to say, actually.
“I am also proud of the progress we made this quarter toward our 2017 revenue growth strategy that centers on gathering a world-class team to help us cultivate our products, attract the right new customers based on their digital lifetime value, and create a culture that can drive sustainable revenue growth,” he went on.
“This progress includes filling out our executive management team with the recent hire of Lori Riley, SVP, Chief Human Resources Officer; launching new high quality beauty brands, like Sirot and CoverFx; launching new fixed programming blocks like Paula Deen on location in Savannah, Georgia, and attracting leading industry advisors to help us bring new brands, products and personalities to our business, as we have done with Tommy Hilfiger and Tommy Mottola.”
Wearable categories, which include Jewelry & Watches, Fashion & Accessories, and Beauty, posted strong revenue performance, and together rose 3 percent. The growth in wearables was offset by a 66 percent decline in the consumer electronics category.
Return rate for the quarter was 20.5 percent; an increase of 160 basis points year-over-year, driven by product mix shifts.
These results were primarily attributable to a 4 percent operating expense reduction of $2.7 million year-over-year, driven primarily by lower content distribution costs and decreased accrued incentive compensation, which were partially offset by higher expenses in marketing, and higher variable expenses resulting from increased credit costs and increased labor costs in customer solutions and fulfillment center.
EPS for the fiscal 2016 third quarter improved to ($0.06), which includes $600,000 in executive and management transition costs and $200,000 in distribution facility consolidation and technology upgrade costs. EPS for the fiscal 2015 third quarter was ($0.09), which included $800,000 in executive and management transition costs, $100,000 in costs associated with the implementation of the Shareholder Rights Plan, and $300,000 in distribution facility consolidation and technology upgrade costs.
The outlook for the rest of the year isn’t rosy. Evine said that it expects revenue in the fourth quarter to be negative low to mid-single digits on a year-over-year basis.