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ValueVision Seeks Broad Growth

Fueled by growing Internet-commerce sales and greater cable distribution, home-shopping channel ValueVision Media reported that revenue and cash-flow for its fiscal fourth quarter were in line with expectations.

Revenue for the company, which does business as ShopNBC, was up 22 percent in the fourth quarter ended Jan. 31, to $136 million. Cash flow was $3 million, compared to $7 million in the same period in 2001.

Internet sales were up 44 percent in the period, to $20 million.

In a conference call with analysts, ValueVision chairman and CEO Gene McCaffery said growth for the period was linked mainly to a better-than-expected rise in the number of full-time equivalent homes in which the shopping channel is available, as well as robust Internet sales.

At the end of the quarter, ValueVision had 44 million full-time equivalent homes — 10 million more than in the year-ago period, and 7 million more than the company had planned to have at year-end.

Internet sales were spurred by ValueVision's initiative to drive Web traffic through its television programs and its partnership with NBC. The Peacock Network and GE Equity, both units of General Electric Co., own about 40 percent of ValueVision.

Although encouraging potential customers to shop online would appear to draw revenue away from the television programs, McCaffery said that is not necessarily the case.

"We think that about 30 percent to 40 percent of what happens on the Internet is an enhancement to television," McCaffery said. "We do market the Internet on television, but it's difficult to determine who would have gone on the Internet and bought versus TV. Split it in half and you probably have something that's reasonable."

ValueVision has added about 20 million homes over the past 24 months, McCaffery noted. And though he said that the revenue performance of those additional homes is not up to the level of its competitors — QVC Inc. and HSN (formerly Home Shopping Network) — McCaffery believes there is plenty of room for growth.

"From an opportunity and performance level, our penetration even in mature households is not as good as our competition," McCaffery said. "It wasn't but three years ago that we had sales per home of about $8.

"We've had a 50 percent increase in our sales-per-home productivity, but we've had a four times increase in the number of homes we have. No matter how you cut it, it would look like our revenue opportunities going forward based on this rapid growth are pretty good."

One way to boost per-home revenue is by offering new products. McCaffery said that ValueVision's recent acquisition of FanBuzz, an online sports-apparel retailer, is a step in the right direction.

ValueVision sales have been heavy on high-end jewelry and low-margin personal computers — those two categories accounted for about 65 percent and 24 percent of sales, respectively, in 2001. While those product lines will remain an important part of the business, McCaffrey said the focus is on growing sales in soft home goods and apparel, and all other categories.

"We would like to get the 'all other' to be much higher," he said. "The all other categories have margins that range in the high 30 [percent] and low 40 [percent range]."

McCaffery predicted that ValueVision will begin to see results of that new focus as early as the first quarter, which ends April 30.

ValueVision reiterated its earlier guidance for the first quarter. It expects sales to rise between 12 percent and 16 percent, to $125 million to $135 million. Cash flow is projected reach somewhere between $3 million and $5 million.