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The operator of ShopNBC blamed falling consumer confidence for a slowdown in sales growth, leading to an operating loss.
By Chris Serres, Star Tribune
Last update: May 21, 2007 – 8:57 PM
http://www.startribune.com/535/story/1198033.html
Blaming a sudden drop in consumer confidence for slowing sales, the parent company of home shopping network ShopNBC is laying off 170 workers, or 12 percent of its total staff.ValueVision Media Inc., which is based in Eden Prairie and owns ShopNBC, said sales of jewelry, big-screen TVs, furniture and other items slowed dramatically in mid-March, causing the company to post a quarterly operating loss.
"We hope the consumer will come back and demand will increase, but we can't bank on it," said William Lansing, president and chief executive of ValueVision Media. "All we can do is focus on what we can control, and that's our cost structure."
About 100 of the job cuts will be at ValueVision's warehouse in Eden Prairie, where it stores many of the products it sells on ShopNBC. That facility will be closed and consolidated with one six times as large in Bowling Green, Ky., Lansing said. The other 70 jobs will come from ValueVision's headquarters and its two outlet stores. The stores, in Eden Prairie and Albertville, will close.
The layoffs coincide with increased worries over record-high gasoline prices and a wave of mortgage defaults. Consumer confidence fell in April to its lowest point in eight months, according to a Reuters/University of Michigan survey. Wal-Mart Stores Inc., the nation's largest retailer, said sales at its discount stores open at least a year fell 0.1 percent in the first quarter. Home Depot's declined 7.6 percent.
Falling consumer confidence often is reflected first in reduced spending on discretionary items, such as jewelry and furniture, Lansing noted. "When people read about everything from housing prices falling, to subprime credit issues, to high gas prices ... it gets them to hunker down," he said. "They bring some renewed discipline to their spending and that affects all of retail."
One of ValueVision's main competitors, HSN, last week laid off 60 workers, most of them at its headquarters in St. Petersburg, Fla. HSN, a shop-at-home network with about 2,500 workers, said its layoffs were part of an effort to drive down costs and reduce redundant positions.
The layoffs at ValueVision are the first since Lansing became chief executive 3½ years ago. Since his arrival, the company has hired about 500 people, bringing its workforce to about 1,300. At the same time, the company has changed its merchandise mix. Two years ago, Lansing began to shift its focus away from jewelry to a wider variety of goods, including cosmetics, home electronics and housewares. The company recently launched ShopNBC.TV, which makes its television network available over the Internet.
In the first quarter, ended May 5, ValueVision's sales rose 5 percent to $188 million. It was the first time in several quarters that sales growth slowed to less than 10 percent, Lansing said. The company posted an operating loss of $7.43 million, up from $3.92 million a year ago. "We've focused very much on growth over the past several years," Lansing said. "I'm proud of that growth record. But it doesn't make it any easier to lay people off." The company announced the layoffs and its earnings after the market closed Monday. Shares fell 11 cents in after-hours trading to $10.29