Genesis Makes Last Attempt at SalvationAiling Genesis Direct, Secaucus, NJ, doing business as Proteam.com, filed a petition to reorganize under Chapter 11 last month in an effort to continue operations. Genesis was founded by Warren Struhl, a real estate executive who made his direct marketing name with the hugely successful Paper Direct catalog in the early 1990s.
The voluntary filing follows on the heels of Proteam's latest reinvention as a sports product Internet marketer from a catalog marketer of sports products, gifts, collectibles, and kid's merchandise. Creditors include Diplomat Corp., Traven Corp. and H&L Productions Inc.
Proteam's president and CEO, Harry L. Usher, who joined the company less than two months ago, will lead the reorganization plan. Usher, along with Struhl, its current chairman, did not return calls.
The public company, now touted as "The Internet's largest sports store," markets sports and sports-related merchandise through its Web site (www.proteam.com) and catalogs, including Nothing But Hoops, Hot Off the Ice and NASCAR's Redline. GE Capital owns about 25 percent of Proteam.com.
Industry observers are not optimistic about Proteam's future. "This company won't likely find its way out," said one executive. Another agreed. "They have lost more money faster than any other catalog company I've ever heard of," he said. "A lot of people lost money on this deal. It doesn't look good."
Last February, it began to reposition, selling off most nonsports-related catalog businesses, selling its distribution facility and reducing employee head count. The company still owns Carol Wright and The Edge Co.
Its current situation may stem from the failure of its business model of aggressive acquisition of niche catalogs without a clear commitment to cultivate and sustain those properties, many of which were sold off.
In the July/August 1998 Dean Report, catalog consultant Bill Dean commented, "At some point, Genesis must balance growth through acquisition with growth of its current holdings. In this balance lies the true test of its radical business model." Some catalog industry executives speculate the lack of traditional catalog marketing expertise at senior management levels exacerbates the situation.
Losses continued to mount this year. The company filed its annual report for the year ended March 27, 1999, with a net loss for fiscal 1998 of $155.8 million, compared to $76.2 million for fiscal 1997. Of that amount, $63.3 million was attributed to restructuring charges and losses associated with the disposal of noncore businesses.