E4L Struggles to Reinvent Itself Again
Although it appeared that some investors were listening to the grand statements made by the company's new management, under the leadership of chairman/CEO Stephen C. Lehman, its stock has gone from a high this year of $11.75 a share to a low of $1.31. That price range was considerably less than the target set by Emerald Research, Lancaster, PA, which projected in February that the stock would reach $17 in 12 months and $23 in 18 to 24 months. It was trading just over $3 last week.
While there is still time to meet those projections if investors get on board, the company was compelled to issue a desperate-sounding statement Oct. 27 saying the company "knows of no operating or business reason for the recent decline in its stock price." Now, E4L is boosting its efforts to jump-start interest, trumpeting a relaunch of its membership-buying program next month, a possible initial public offering for its Internet retailing company, BuyItNow.com, and the January rollout of a new beauty product infomercial intended to build a continuity business.
Meanwhile, Lehman continues to expound on the benefits of spending $100 million a year on infomercial media in an attempt to leverage sales in other marketing channels.
"I don't think that our initial strategy has changed dramatically," he said in an Internet broadcast last week. "The stock has had wild fluctuations, but I think that 2000 is going to be a year that the fruits of our labors will be realized."
The company's net revenue shrank 15 percent to $73.6 million for the three months ended Sept. 30, a decrease that was attributed to its strategy of focusing on lower volume, higher margin revenue sources in retail and membership services. It also lost two major media contracts in Europe that adversely affected its revenue.
Last year, the company repositioned itself as an Internet retailer with the launch of its Everything4Less buying club, which allowed consumers willing to pay a subscription fee to buy merchandise online. The buying club hit some snags as E4L and its partner in the club, Cendant Corp., Parsippany, NJ, terminated their relationship. Lehman said his company can make the club work next year.
"Largely due to the success with membership, we will have a new club up and operating for the first quarter," he said.
E4L owns about 47 percent of BuyItNow.com, an Internet retailer that sells a variety of merchandise and faces competition from a gamut of online stores that are trying to make money this holiday season. It also is considering partnerships with brick-and-mortar retailers wanting to expand into the online arena.
"We see other opportunities with other retail partners who have strong retail distribution but may not have Internet presence they are comfortable with," Lehman said, offering an example of Cosmeticsplus.com, the Internet version of the New York retail chain, which resides within the BuyItNow.com site.
Finally, the company seeks to air infomercials that will help generate continuity sales. The idea is that consumers will buy a package of skincare products, then receive a continual refresher package that is billed automatically. E4L's competitor Guthy-Renker Corp., Palm Desert, CA, has similar programs for its Principal Secret and ProActiv Solution skincare products.
The company intends to roll out an infomercial starring Jennifer Flavin Stallone, one of the popular hosts on the Home Shopping Network, to sell her brand of Serious Skin care products. E4L announced an acquisition of Stallone's company earlier this year.
"Providing a product then continuity will help to bring stability to the infomercial
model," Lehman said.