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Hanover Direct Announces Digital Realignment of Company.

WEEHAWKEN, N.J.--(BUSINESS WIRE)--March 30, 1999--

Emerging E-Commerce Opportunities Lead to

Formation of Two Internet Focused Divisions

Hanover Direct, Inc. (AMEX:HNV), positioning itself to become a leader in general merchandise electronic commerce, announced plans for a strategic realignment of the Company that will result in two separate Internet-driven divisions, brand marketing and web services.

"We are taking this action to transform the business model of the Company, and improve visibility to our shareholders of the brand merchandise and platform service components of our business. Our core brands are each leaders in their market niche and, through this realignment, can build their first mover advantage through improved strategic management focus," stated Rakesh K. Kaul, President and Chief Executive Officer of Hanover Direct, Inc.

Realignment of the Company into two distinct Internet-driven organizations will:

- Accelerate the flow of catalog shoppers who are steadily

migrating to the Internet by utilizing the Company's 13 brands as

entry points for its 4 million/12-month customer base; - Carve out a leadership position in third party services and

fulfillment, an e-commerce niche with significant market

opportunities; - Enable the Company to service and engage in new business models,

including those based on factory direct value propositions.

Kaul will oversee both of the newly created divisions. Earnings results will be reported separately for each division.

Brand Marketing Division

The brand marketing division will be comprised of the following:

- The Company's catalog and/or e-commerce web site portfolio of

home fashions, including Domestications, The Company Store,

Colonial Garden Kitchens, Kitchen & Home, Improvements, and The

Safety Zone; apparel, including Silhouettes, Tweeds,

International Male, Austad's, and Undergear; and gift brands,

including Gump's By Mail, and Gump's San Francisco, as well as

all related inventory - Marketing and merchandising management - Customer lists and related data-bases - 240+million annual catalog distribution directing consumers to

associated web sites - Trademarks and intellectual property - Digital catalog content - World-wide network of over 5000 vendors - Credit marketing arrangements - Strategic partnerships and Internet alliances, such as those

already in effect with Excite, ArtSelect and Xoom - Service arrangements with Hanover's web services division

Expectations are for the division's continuing merchandise businesses to post sales increases during 1999. On a pro-forma basis, the division would have reported 1998 revenues of approximately $540 million of which e-commerce sales accounted for $8.3 million, a 10-fold increase over the prior year.

"Electronic commerce represents a powerful new media for the future of retailing. Our core brands, each a leader in its market niche, cater to specific communities of interest and are uniquely positioned to capitalize on the growing trend of consumers to shop on-line with general merchandise shopping particularly centered around our core categories - home furnishings, apparel and gifts. Our brand marketing team will be able to create new strategic alliances and operate without the burden of the `bricks and mortar' side of the business," stated Kaul.

Web Services Division

The web services division, a one-stop Internet services provider, is comprised of the following:

- State-of-the-art common system computer platform, a `plug and

play' system performing the high volume, `front-end' logistical

services required by e-commerce companies such as telemarketing,

order processing, credit card transaction processing, customer

database management and systems programming support. - Keystone Fulfillment, a back-end fulfillment services vendor with

the access to bricks, mortar and capacity to service its growing

roster of third-party clients, including L.L.Knickerbocker Co.,

United Retail Group, Inc., and the National Geographic Society. - An Internet marketing services group providing Internet players

with every resource they need, including creative marketing,

web-site creation, hosting and management.

Expectations are for the web services division to post sales increases during 1999 primarily via the addition of third-party contracts. The division is also committed to making significant additional investments in its world-class computer platform over the next three years. The Company's strategic realignment will include the establishment of formal inter-company service arrangements with the brand marketing division for web hosting, system interface, fulfillment and corporate services.

"The centerpiece of the web services division, Keystone Fulfillment, is uniquely positioned as a `one-stop shopping' solution for companies entering into retailing via e-commerce. Keystone is well on the way to becoming a preferred Internet fulfillment brand in its space because of its core competency in servicing quality, branded consumer franchises," added Kaul.

Hanover Direct, Inc.

In 1998, the Company circulated approximately 242 million catalogs, answered more than 9 million customer service/order calls, and processed and shipped over 7 million packages to customers in North America. Over 80,000 stock keeping units are offered via catalog and e-commerce web sites. The Company has engaged in Internet commerce since 1997.

"Our goal, through this transformation, is for Hanover Direct's brand marketing division to become the premier, global, multimedia direct marketer of vertically integrated specialty general merchandise brands, with Keystone Fulfillment as the preferred third party provider of consumer intimate e-commerce services, both supported by the web services division's world class knowledge, technology and fulfillment platform," Kaul said.

"By putting into effect this plan, the full earnings potential of our brands, and our world class systems platform, will be unlocked. The realignment will drive our ability to grow the business going forward, converting our growing bank of digital assets into solid and sustainable shareholder value. This action also demonstrates our commitment to optimally position the Company by providing the flexibility for shareholder value maximization options," Kaul concluded.

Hanover Direct, Inc. (AMEX:HNV), and its business units, provide quality, branded merchandise through a portfolio of catalogs and e-commerce platforms to consumers, as well as a comprehensive range of Internet, e-commerce, and fulfillment services to businesses. The brand marketing division is comprised of the Company's catalog and e-commerce web site portfolio of home fashions, apparel and gift brands, including Domestications, The Company Store, Colonial Garden Kitchens, Kitchen & Home, Improvements, The Safety Zone, Silhouettes, Tweeds, International Male, Austad's, Undergear, and Gump's By Mail. The Company also owns Gump's, a retail store based in San Francisco. Each brand can be accessed on the Internet individually by name. The web services division is comprised of the Company's Internet marketing services group, systems platform and fulfillment service vendor, Keystone Fulfillment Inc. (www.keystonefulfillment.com). Information on Hanover Direct, including each of its divisions, can be accessed on the Internet at www.hanoverdirect.com.

Forward Looking Statements

The following may be deemed to be forward looking statements:

Hanover Direct, Inc. (AMEX:HNV), positioning itself to become a leader in general merchandise electronic commerce, announced plans for a strategic realignment of the Company that will result in two separate Internet-driven divisions, brand marketing and web services.

"We are taking this action to transform the business model of the Company, and improve visibility to our shareholders of the brand merchandise and platform service components of our business. Our key brands are each leaders in their market niche and, through this realignment, can build their first mover advantage through improved strategic management focus,"

Realignment of the Company into two distinct Internet-driven organizations will:

- Accelerate the flow of catalog shoppers who are steadily

migrating to the Internet by utilizing the Company's 13 brands as

entry points for its 4 million/12-month customer base; - Carve out a leadership position in third party services and

fulfillment, an e-commerce niche with significant market

opportunities; - Enable the Company to service and engage in new business models,

including those based on factory direct value propositions.

"Electronic commerce represents a powerful new media for the future of retailing. Our key brands, each a leader in its market niche, cater to specific communities of interest and are uniquely positioned to capitalize on the growing trend of consumers to shop on-line with general merchandise shopping particularly centered around our core categories - home furnishings, apparel and gifts. Our brand marketing team will be able to create new strategic alliances and operate without the burden of the 'bricks and mortar' side of the business,"

Expectations are for the division to post sales increases during 1999 primarily via the addition of third-party contracts. The division is also committed to making significant additional investments in its world-class computer platform over the next three years. The Company's strategic realignment will include the establishment of formal inter-company service arrangements with the brand marketing division for web hosting, system interface, fulfillment and corporate services.

Keystone is well on the way to becoming a preferred Internet fulfillment brand in its space because of its core competency in servicing quality, branded consumer franchises,

"Our goal, through this transformation, is for Hanover Direct's brand marketing division to become the premier, global, multimedia direct marketer of vertically integrated specialty general merchandise brands, with Keystone Fulfillment as the preferred third party provider of consumer intimate e-commerce services, both supported by the web services division's world class knowledge, technology and fulfillment platform."

"By putting into effect this plan, the full earnings potential of our brands, and our world class systems platform, will be unlocked. The realignment will drive our ability to grow the business going forward, converting our growing bank of digital assets into solid and sustainable shareholder value."

Cautionary Statements

The following material identifies important factors, which could cause actual results to differ materially from those in the forward looking statements identified above:

A general deterioration of economic conditions in the United States leading to increased competitive activity, including a business failure of a substantial size company in the retail industry, a reduction in consumer spending generally, or specifically with reference to the types of merchandise the Company offers in its catalogs. The failure of the Internet generally to achieve the projections made for it with respect to growth of e-commerce or otherwise.

The ability of the Company's computer systems to connect with the systems of others, and to be able to serve the others' fulfillment needs.

The Company has a history of operating losses. Continuation of the operating losses may prevent the Company from making the investments in e-commerce that are required to be made to achieve a position of leadership in serving the e-commerce needs of companies doing business, or desiring to do business, on the Internet. Also acquisitions may be prevented by the continuation of operating losses.

The ability of the Company to attract management with the requisite experience in e-commerce or in Internet businesses and to develop a culture that is consistent with the manner in which e-commerce is managed.

The ability of the Company's brands to continue to maintain the number one position in their niche despite increased competition from others, which, in some cases, have significantly greater resources than the Company.

Only one of the Company's brands is currently vertically integrated. The Company must acquire or invest in the facilities, which would make more of them vertically integrated.

There is no assurance that the Company can make such acquisitions on terms, which would be satisfactory to it.
COPYRIGHT 1999 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1999, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Business Wire
Geographic Code:1USA
Date:Mar 30, 1999
Words:1795
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