FINGERHUT PULLS THE PLUG ON ‘S’ SHOPPING SHOW CALLED TOO COSTLY
Byline: Sharon Edelson
NEW YORK — Fingerhut Cos., a Minneapolis-based direct marketer, has canceled S: The Shopping Network, its highly touted TV shopping service that was scheduled to be launched in October, then postponed to December.
The move was not entirely unexpected. Fingerhut, which will do $1.8 billion in sales this year, was said to be getting cold feet as it considered the mounting start-up costs. Diminished cable capacity — the dearth of channels available to start-up networks — put a damper on the company’s enthusiasm, too.
But the main factor in Fingerhut’s decision to scrap the channel was its inability to reach a final agreement with a group of five institutional investors assembled by Montgomery Securities.
“We have previously stated that we were not willing to assume losses from our television activities in 1995,” said Ted Deikel, chairman and chief executive officer of Fingerhut. “We could not reach an agreement with our investors that removed the risk of ongoing losses. We are convinced it is in our shareholders’ best interests to shut down S.”
Fingerhut also is scaling back the activities of USA Direct, its infomercial division. A Fingerhut spokeswoman said there would be staff reductions. USA Direct and S had 30 employees combined. Only five or six will remain after USA Direct is integrated within Fingerhut.
USA Direct will develop a few infomercials in 1995, the spokeswoman said. Fingerhut will continue to handle fulfillment and order-taking for MTV Networks’ home shopping test, The Goods.
Fingerhut will take a fourth-quarter, after-tax charge of approximately $19 million. Fingerhut said its board has authorized a second stock buyback of two million shares, in addition to the 500,000 shares already authorized.
S was envisioned as an upscale service focusing on a broad merchandise mix and higher price points — $499 for a leather coat, for example — than existing shopping channels. S, based in Las Vegas, set up a studio outpost at the Forum at Caesar’s Palace to capture the aura of one of the country’s glitziest shopping malls.
But some industry analysts questioned Fingerhut’s concept.
“At the moment, there’s no room for three people in the industry,” said Peter Siris of UBS Securities, referring to Home Shopping Network and QVC. “Fingerhut didn’t particularly have a strong strategy for a third channel.”