Why ValueVision Shares Tumbled

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What: Shares of ValueVision Media (NASDAQ: EVLV  ) were losing value today, falling as much as 28% after reporting quarterly earnings.

So what: The home-shopping channel operator said sales increased 10% to $149 million, ahead of estimates, but it missed on the bottom line with a per-share loss of $0.02 on estimates of a penny profit. Still, that was an improvement over an $0.08 per-share loss in the quarter a year ago. In the release, CEO Keith Stuart noted progress in rebranding ShopHQ as well as its fifth straight quarter of positive EBITDA.

Now what: Despite the increase in sales, gross margin fell 70 basis points to 37.5%, indicating that ValueVision is having difficulty turning additional sales into profits. As a company in the midst of a turnaround, shares have been extremely volatile over the past year, jumping as much as 300% before crashing today. That exaggerated movement, a result of widely differing assessments of the company's prospects, probably explains today's drop more than anything else, as a $0.03 earnings is disappointing but not particularly alarming. Still, the quarterly loss is a sign that significant profits are likely further away than investors had hoped.

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  • Report this Comment On August 22, 2013, at 11:22 PM, Trumpace wrote:

    The name of the VVTV CEO is spelled "Stewart" not "Stuart". Also the CEO during the conference call said the Turn around is over and the focus is on growth. The two cent loss included costs associated to the rebranding name and the one time fee paid to NBCU which is the last payment that will be made for the ShopNBC brand as VVTV moves to brand itself as ShopHQ. Without those two items they would have met or beat the street I believe. I do not think the analysts had that factored in since they didn't change their numbers when the announcement of the two items were made. This decline in the price was over done IMHO.

  • Report this Comment On August 23, 2013, at 10:18 AM, CollinsIR wrote:

    Despite the share price reaction, the reality is that gross profit increased 8% to $55.7M in Q2'13 reflecting higher sales that more than offset the gross margin decrease, but clearly gross profit growth did lag the 10% net sales increase. On the bottom line the net loss was trimmed by over $3M to $800k versus $3.8M last year and adjusted EBITDA rose over four-fold to $3.8M from $0.7M –and for this the shares are in a free fall? ; )

    What management made clear in their conf. call was that they are balancing top and bottom line growth with efforts to expand the customer base. Growing the customer base is integral to the long-term growth strategy of the company, as new customers bring additional sales and the opportunity for repeat purchases in other product segments.

    VVTV's customer growth efforts involve improving the customer experience and broadening the merchandise mix, to include a wider variety of products, lower price prints (to reach a larger potential consumer population) and some lower margin products in the Home & Consumer Products segment. This segment is particularly effective in attracting new customers and the net result of their efforts has been an 11% increase in the number of customers who have purchased from ShopHQ over the past 12 months, including a 22% increase in that measure during Q2 ’13.

    Trumpace is correct in that $500k was incurred in Q2 related to the rebranding, in addition to continued investments in enhancing the infrastructure to improve the customer experience. The NBC cash payment was not a factor in the quarter as that cost is amortized pro rata, but there were higher costs related to personnel & bonuses, infrastructure improvments as well as higher variable costs on a 31% rise in shipped units.

    We represent ValueVision in their IR efforts and while we understand the punishment a Company can get from missing analyst estimates, we hope some rational thought will prevail as investors recognize that what ValueVison is doing is working to build a stronger platform for the future. To drive revenue growth they need more products, more customers (which involves and improved customer experience) and more purchases per customer - and they are working on all of these areas while delivering an improved bottom line. That they sacrificed a little margin to accomplish these goals… does that warrant the markets reaction. Time will tell - we are biased but betting on a team comprised of former QVC execs - they seem to know what they are dong.

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