Fingerhut Buyer Says Brand May Be Beyond Revival
"That's absolutely why Ted Deikel will look at the viability of starting a new business," said Mary Pernula, vice president of public relations at Redtag Inc., an Eden Prairie, MN, wholesale exchange run by Petters for firms that sell consumer merchandise. "The business has deteriorated and now has shut down."
A Federated representative differed with that opinion.
"They're buying the Fingerhut name, so obviously there's some value in there," said Carol Sanger, vice president of corporate affairs at Federated, Cincinnati.
The deal, announced last week, is for the Fingerhut name, Web address, customer list and corporate headquarters in Minnetonka, MN; warehouses in St. Cloud, MN, and Piney Flats, TN; software; a data center in Plymouth, MN; and existing inventory. No terms of the sale, which is expected to close within two weeks, were announced.
"The bottom line is that we had anticipated selling assets of Fingerhut, and realizing $1.1 billion to $1.3 billion in return, and this is a step in that process," Sanger said.
Federated paid $1.7 billion for Fingerhut in 1999. But the combination of the more upscale Federated and the lower-end Fingerhut never clicked. Sales in December were $209 million, down 20 percent from $260 million in December 2000. Three years ago, Fingerhut's sales were $1.7 billion. Last year, sales were $810 million.
"A lot has changed from the time that we acquired Fingerhut in early 1999 to the present," Sanger said. "The whole economic landscape, for example, the e-commerce bubble has burst."
Pernula would not say whether Deikel and Petters planned to restart Fingerhut's catalog business -- and if so, what the timetable would be -- or simply would fold the acquired assets into the existing businesses.
Fingerhut mailed its last catalog in mid-January and stopped accepting orders last month. Its work force, around 2,230 in Minnesota and Tennessee, is one-third of what it was in January. Even more jobs will be lost after approval of the sale.
"The Fingerhut that we knew eight [or] nine months ago is no longer in business anymore," Petters told reporters last week in Eden Prairie.
Pernula agreed with that assessment.
"There's no business," she said. "They stopped mailing catalogs, they stopped shipping orders and everything. So they've purchased certain assets, which they will use to integrate some of their existing businesses and new businesses and to use some of those assets."
Yet it is possible to find a champion for the Fingerhut brand in Elaine Rubin, chairman of New York-based Shop.org, a National Retail Federation trade association for 200 online retailers.
"From the consumer perspective, a five-month hiatus, having the history that they have and the loyal customers that they've had, I don't think it's going to severely impact, if they choose to reintroduce the catalog or the Internet site," she said.
For Deikel, son-in-law of founder Manny Fingerhut, this will be the third time he has had an ownership stake in Fingerhut. It is Petters' first involvement.
Sanger said a firm whose founders have direct marketing expertise are more fit to run the cataloger.
"Our belief was that somebody who has focused on the direct mail business would have been interested in it and would have been in a different position from us, that the potential Fingerhut represented would have been a better fit for that direct mail business than it is for us," she said.
Federated recently slimmed down its own direct marketing operations, reducing bloomingdales.com to a marketing site and wedding registry and dumping the Macy's catalog. The $15.6 billion company's main direct businesses are macys.com and Bloomingdale's By Mail, plus the store catalogs.
Federated is still proceeding with the efforts to sell Arizona Mail Order, Figi's and Popular Club.
"We're talking to parties who are interested in that," Sanger said. "We have said from the outset that we would anticipate selling those businesses as ongoing businesses, and they're still publishing and still operating and they're not affected by this all."