Valuevision, which sells merchandise through TV- and Internet-based channels, had a year right out of a daytime drama. Put aside its net loss: 2008 saw it dismiss a newly hired CEO, fail to generate interest from outsiders interested in purchasing it and revamp its product mix.
First, the financial results. Valuevision generated $565.4 million during its fiscal 2008, a drop from the $767.3 million it pulled in during 2007. The company reported a net loss of $97.8 million during 2008, compared with net income of $22.5 million during 2007. Valuevision’s most recent fiscal year ended Jan. 31.
The bulk of its sales come from its television-based efforts: Its Internet operations, which include ShopNBC.com, generated $181.2 million during 2008, down from $217.9 million in 2007.
By Valuevision’s own admission, its 2007 income is, on the surface, unindicative of its results. The company pulled in $40.2 million by selling its interest in Ralph Lauren Media during the year. Valuevision had an operating loss of $23.1 million in 2007, which deepened to $88.5 million in 2008.
It wasn’t a good year for cost containment, either. The company’s operating expenses, which accounted for 30.9% of its revenue in 2007, jumped to 37.9% in 2008. And whatever Valuevision was buying, it wasn’t advertising: Ad costs and search marketing fees, which stood at $24.8 million in 2007, fell to $18.1 million in 2008.
If the financial results weren’t distressing enough, in August, CEO Rene Aiu was fired, five months after she started her job. Three senior official she had hired were dismissed along with her, according to Valuevision’s Securities and Exchange Commission filings.
Aiu has since filed a breach of contract lawsuit, which is currently unresolved.
In September, the company’s board investigated selling the company, or arranging a strategic partnership. Prospective suitors yawned – or, in Valuevision’s own words, the company “did not receive any final bids from any of the parties who participated in the process.”
The board couldn’t even make liquidation work for it, concluding “liquidation would not likely result in any distribution to our shareholders,” according to the company’s most recent annual SEC filing.
Its current energy is going into adjusting its product mix. Its goal is lowering the average price of its offerings, in hopes of increasing the size and frequency of its customer base. The company’s average selling price per unit was $203 in 2008, compared with $233 in 2007, reflecting a product mix toward higher-priced jewelry and apparel in 2007.
The Marketer’s Take: It will be interesting to see how changes to Valuevision’s loyalty program affect its fortunes. When the program was introduced in 2006, it awarded points for purchases made on a private-label credit card. Initially, shoppers who generated a requisite number of points were awarded $50 certificates good for more ShopNBC merchandise. The certificates expired after 12 months. But in second-quarter 2008, the program was modified. Enrollees are given $25 credit upon activation and first purchase, and can earn another $25 certificate toward ShopNBC merchandise. But these certificates expire after only 90 days. The strategy is clearly designed to play to the company’s stated goal of more frequent lower-value purchases. For what it’s worth, sales on the credit cards made up 20% of total sales during 2007, and 21% of sales during 2008.
