ShopNBC lowering its jewelry ambitions

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ShopNBC lowering its jewelry ambitions

By Michelle Graff

January 27, 2009

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ShopNBC will shift its jewelry focus this year to more moderately priced, conservative pieces, as part of an overall organizational strategy to reduce the average price of the goods it sells.

Minneapolis, Minn.--After a year in which jewelry product slowed sales and shrunk margins, ShopNBC will set its sights on lower-priced pieces, the company's new head said in a conference call on Tuesday.

In a question-and-answer session following the call, new ShopNBC Chief Executive Officer Keith Stewart said the company had to discount higher-priced jewelry during the 2008 holiday season to remain competitive in the market.

Beginning in 2009, however, the company will shift its jewelry focus to more moderately priced, conservative pieces, part of an overall organizational strategy to reduce the average price of the goods it sells.

Stewart said ShopNBC's average selling price for a gemstone piece in 2008 was more than $550.

"That's not what the customer was looking to buy," he said. "That average selling price must come down."

Like so many other companies, ShopNBC saw sales decline precipitously in the fourth quarter of 2008 amid the economic crisis and faltering consumer confidence.

According to preliminary financial results released on Tuesday, ShopNBC realized $142 million in revenues in the fourth quarter of 2008, compared with revenues of $218 million for the same period in 2007, a 35 percent decline driven by weakness in jewelry and laptop sales.

Net sales for fiscal 2008 are estimated at $565 million, a 28 percent decline from the previous year.

In addition, on Tuesday, the multi-channel retailer announced the completion of a "strategic alternatives review process," during which it endeavored to find a buyer or strategic partner for the struggling business.

However, during the call on Tuesday, George Vandeman, chairman of the special committee of the board of directors, said a combination of poor market conditions, a difficult retail and credit environment, and the company's financial performance hampered the sale of the company.

ShopNBC also considered liquidation but determined this would not result in any distribution to the company's shareholders.

As a result, Vandeman said the committee's recommendation to the board is to continue to operate ShopNBC as is.

However, as stressed by company officials throughout the call, ShopNBC remains open to the possibility of a sale or strategic partnership.

""We do not view it as closed," Vandeman said of the review process. "We remain open to any transaction that may come along."

With the company facing a rough road ahead, ShopNBC also announced a series of management changes.

CEO John Buck voluntarily stepped down and was replaced by Stewart, but will remain chairman of the board.

In addition, ShopNBC appointed Randy Ronning, a retail and television shopping veteran with more than 30 years of experience, to its board of directors and signed a consulting agreement with strategic advisor Darlene Daggett, who has 30 years of experience in the multi-channel market space.

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