Shareholder Group Presses ValueVision To Replace CEO
Activist investor Clinton Group, Inc., on Wednesday wrote a letter to Eden Prairie-based ValueVision Media urging the company to replace its allegedly poor-performing CEO and multiple board members.
The New York-based investment group said it collectively owns more than 5 percent of ValueVision’s stock and believes the company’s mismanagement has led to ValueVision “dramatically under-perform[ing]” its rivals.
ValueVision, which sells everything from jewelry to consumer electronics to beauty treatments on its website and television channel, said—in response to Clinton—that it fully supports its management team and their business strategy. ValueVision brands itself as “ShopHQ,” a moniker that replaced its well-known “ShopNBC” brand name in May.
In the letter, Clinton argues that the company’s “ubiquitous cable and satellite distribution” is an uncommonly valuable asset that has been “under-exploited” by the company’s CEO, Keith Stewart. Clinton also alleges that Stewart hasn’t lived up to his promises to change ValueVision’s business model and hasn’t met his own goals for the company.
“Mr. Stewart missed nearly every long-term projection and metric he offered during his tenure,” Clinton President George Taxin wrote in the letter. “As we noted, for example, his publicly stated goal was to create a company with more than $1 billion in revenue with 8-12 percent [profit] margins by now. He missed both targets by a country mile.”
The investor group even offered to “put [its] capital where [its] mouth is.”
“We would be pleased to make a fresh, primary, minority investment in the company of at least $25 million at a substantial premium to the stock price,” Taxin wrote, “if the board would accept our recommendation and replace Mr. Stewart and upgrade the board significantly.”
Clinton seemed to have a specific individual in mind to replace Stewart but remained vague on the details: “We are aware of a well-known, seasoned industry executive that would be a terrific fit for the CEO position.”
ValueVision responded to Clinton later on Wednesday.
“Since the appointment of Keith Stewart as CEO in January 2009, substantial shareholder value has been created, as demonstrated by an over 940 percent increase in ValueVision’s share price, from $0.52 to $5.42 as of [Wednesday’s] market close, as a result of the successful implementation of the company’s turnaround strategy,” ValueVision said in a statement.
Shares of ValueVision stock were trading up about 3.9 percent at $5.35 during Thursday afternoon trading. The stock is up 187 percent since the beginning of 2013.
“ValueVision’s management team, working closely with the board of directors, has streamlined operations, improved the quality of the company’s TV distribution footprint, and significantly enhanced the stability and flexibility of its balance sheet, resulting in stronger financial performance,” ValueVision said.
Clinton, however, believes ValueVision has fallen behind its competitors in terms of market share, and has failed to return to pre-recession revenue levels.
“Over the past four years, Mr. Stewart and his management team have in our view abjectly failed to build significant proprietary brands, expand product assortments sufficiently, diversify the program schedule, optimize the product mix, and retain key successful vendors,” Clinton said.
ValueVision concluded that Clinton didn’t acknowledge the major elements of the company’s turnaround and improved financial performance, and said the investor failed to provide any concrete suggestions to improve strategy moving forward.
ValueVision’s revenue totaled $586.8 million for the 2012 fiscal year, up about 5 percent from $558.4 million in 2011. However, that’s down about 25 percent from its high of $782 in 2008, which, according to Bloomberg, is the last year the company posted an annual net profit. ValueVision did, however, swing to quarterly profit in May, when it reported positive earnings—of $1 million—for the first time in seven years.
In addition to Clinton, NBC Universal, Inc., also owns a large portion of ValueVision stock. In 2010, NBC notified the company that it intended to sell its nearly 6.5 million shares, but later backed out and decided to stay on due to “prevailing prices.”