Evine Live execs reiterate plan for lower profit margins, investors sell shares

November 25, 2015 at 2:38AM

Evine Live Inc.'s plan for sales growth hinges on lower profit margins, executives said Tuesday after the home shopping company reported a wider loss in its latest quarterly results.

Investors responded with the biggest sell-off of the cable and online retail company's stock since May. Evine Live shares closed down 23 percent to $1.89, their lowest price since December 2012.

Executives were mildly optimistic about the holiday retail season, saying they expected revenue growth, though they didn't specify an amount, and a return to profitability.

"Given the holiday competitive market that we're in, and some of the challenges of other retailers in our space, we remain confident in the momentum we've established over these last couple of quarters," Mark Bozek, chief executive, told analysts in a conference call.

The company, based in Eden Prairie, reported a net loss of $5.2 million, or 9 cents a share, for the three months ended Oct. 31. Analysts were expecting a loss of 4 cents a share. Evine Live lost 1 cent a share in the same three months of 2014.

Revenue rose 2 percent to $162.3 million.

Evine Live this year shifted its product mix to reduce its reliance on jewelry. As it did, the company was squeezed by the need to discount jewelry to match competitors' prices and the fact that the product segment that grew in its sales mix, consumer electronics, is typically a low-margin business.

Higher shipping costs also dented the company's profit margin. All combined, Evine Live saw a 5 percent drop in its gross profit from a year ago.

Executives repeated earlier statements that they have decided to accept lower margins in order to drive revenue.

"We really believe that the long-term, sustainable growth that we'll obtain by growing the top line will be done with much more competitive margins," Bozek said.

Jewelry accounted for 36 percent of revenue in the quarter, down from 40 percent a year ago. Home and consumer electronics rose to 32 percent of revenue from 29 percent a year ago.

Shipments of all products grew 7 percent for Evine Live, but the average selling price of its goods fell to $65 from $67 a year ago.

The company signed new distribution agreements with Verizon and Time Warner during the quarter. It just launched a second cable channel, called Evine Too, that carries a three-hour-delayed version of its main channel to Time Warner Cable systems that serve 2.5 million homes in California, west Texas and Hawaii.

With the channel up and running, "we are seeing encouraging results," chief financial officer Tim Peterman said on the conference call. "We think it's a very important initiative for the company and we expect big things from this in the future."

Evan Ramstad • 612-673-4241

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Evan Ramstad

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Evan Ramstad is a Star Tribune business columnist.

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