Fashion Channel Loses $20 Million; Chairman Departs

The Fashion Channel Network, a home shopping venture started with some fanfare a year ago, on Tuesday reported a whopping $20-million loss for its first year and said it needs an “immediate infusion” of cash to keep running.

In addition, the Carson-based company said founder Charles W. Gee II is “no longer serving as” chairman and chief executive. The company named a new president but did not immediately fill Gee’s positions.

“The situation was far worse than previous reports had led anyone to believe,” said Larry Gerbrandt, an industry consultant with Paul Kagan Associates in Carmel, Calif. “We were told (in January) that the company actually expected to reach break-even, at least on an operating basis, in March or April and would be able to make it without cash infusions.”

Gerbrandt added that the “situation deteriorated very rapidly” because the company’s merchandise did not appeal to viewers.

“They bought too much of the wrong clothing inventory last fall,” he said. “The company virtually ate itself alive.”

Plagued by start-up delays, the venture, which sells clothing, cosmetics and accessories, went on the air over cable networks in October at the same time the company’s stock was offered to the public. Just over two weeks later, its stock and that of many other new issues suffered catastrophic losses in the market crash.

Since then, the company has been forced to move merchandise by selling it at drastic reductions, frequently below its own cost, Gerbrandt said.

For the first four months of operation, much of the loss was accounted for by start-up costs, Fashion Channel said. Sales during the period were only $5.5 million, a far cry, Gerbrandt noted, from the company’s ambitious first-year projections of $150 million to $200 million. “It just wasn’t in the cards,” Gerbrandt said.

Gee is the last of three founding top executives to leave the management of Fashion Channel. In early January, the company announced the departures of two other executives--Raymond L. Klauer, a former president of May Co. California, and Wayne C. Smith. Gee at the time said the two left on the “very best terms,” but observers noted that he later blamed them for most of the company’s woes.

Gee will remain as a director, Fashion Channel said in a statement Tuesday.

‘Golden Opportunity’

Named as president was Donald Miller, who joined the company in February as director of merchandise. Miller, 62, previously had worked for Marshalls, an off-price apparel retailer owned by Melville Corp.

“The company is still operating,” Miller said Tuesday. “It’s business as usual, and we’re holding down the fort.

“But it’s not fun,” he added. “Obviously, we’d be in better shape if we had some money. The merchandise that we have is OK; it’s just that we need more of it.”

Miller said the company is talking with several parties that have expressed interest in buying part of the company. “If it’s allowed to die on the vine, then some people have passed up a golden opportunity,” he said.

Among companies that Gerbrandt said might be interested in investing in Fashion Channel are Shop Television Network, which is backed by J. C. Penney and STN of Hollywood; QVC, and Cable Value Network.

In over-the-counter trading Tuesday, Fashion Channel shares tumbled $1.625 to a bid price of $1 a share.