Shop At Home hit a 52-week low of $1.50 on Oct. 26, capping a decline sparked by the dot-com fallout in April and a fiscal fourth quarter that ended June 30 marked by higher-than-average merchandise returns and sub-par profit margins.
The stock hit a 52-week high of $14.75 on Jan. 26. The stock closed at $2.50 on Sept. 26, and on Oct. 31 it closed at $2.
The returns and low margins led to an income loss from operations of approximately $12 million for the 12-month period that ended June 30.
Toward the end of fiscal 2000, the TV and online shopping network shifted its sales focus heavily to electronics and jewelry. The profit margin for electronics is usually between 20 percent and 25 percent, which is lower than the company's historical profit margin in the high 30s. Between 35 percent and 40 percent of jewelry items are usually returned, which is greater than the company's historical 20 percent to 25 percent return rate.
“In this business it is important to stay in balance, and we shifted out of balance for a little while,” said Tim Engle, president and chief operating officer at the Shop At Home Network and Collectibles.com, Nashville, TN.
Engle also attributed the company's disappointing fiscal fourth quarter to a shift toward a more lenient return policy.
“We were letting consumers return past our 30-day policy, which led to increased returns,” Engle added.
John Lawrence, equity analyst at Morgan Keegan, Memphis, TN, said, “The company gave a longer period of time for returns in an effort to generate sales, and it did not work.”
The company underwent managerial and operating changes in July following the release of the year-end report.
The company combined the management teams of its 1-year-old online shopping site, Collectibles.com, and the 16-year-old traditional offline shopping network. Engle, who was formerly president of Collectibles.com, and his management team of three executives took charge of both business units, eliminating the former management team at Shop At Home that was headed by John Robertson, former chief operating officer.
“We got the duplication out. Now there is one team working for one channel,” Engle said. According to an internal report, the company reduced the number of employees by 15 percent from its peak in May through the elimination of 90 full-time and 50 part-time positions.
“Shop At Home is converting TV customers to Web traffic,” Lawrence said.
The Collectibles.com Web address is posted on the Shop At Home TV program continuously.
“If you allow customers multiple ways to order from you, they will ultimately order more,” Lawrence said.
To lower costs further, the company is building an inhouse fulfillment center to distribute all merchandise, which is currently distributed by each participating vendor. “This move will help Shop At Home get orders out the door faster and cheaper,” Lawrence said.
Shop At Home primarily targets males age 24 through their late 30s with an average annual household income of $50,000. The company sells sports collectibles, coins, cutlery, electronics, jewelry and beauty products. Its smaller female demographic is between 30 and 50 years old. The network reaches 60 million households nationwide, Engle said. During the fiscal fourth quarter, Collectibles.com attracted approximately 27 million page views, with a sales conversion rate of about 5 percent.
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