Harte-Hanks Inc.: Calling All Home Shoppers

Housing downturn cuts into direct marketing provider's profit and revenue.

The weak housing market made 2007 a year to forget for San Antonio-based direct marketing company Harte-Hanks Inc. A poor performance from the company's Shoppers business segment, known for its PennySaver shopper guide, resulted in profit and revenue losses and unit restructuring during the third quarter. And with the housing market not expected to turn around anytime soon, the near-term outlook doesn't look much brighter.

"We expect the market conditions for Shoppers revenue performance will continue and not stabilize until at least after the first part of 2008," said Dean Blythe, who recently took over as president, in an October statement. . . . As we continue to review all facets of the organization, it is unlikely that we will make up any of this shortfall before the year is over."

Shoppers' poor performance contributed to a 21% profit drop and a 2.7% revenue decline from the year-earlier period. Earnings fell to $21.9 million, or 30 cents per share, compared with $27.7 million, or 35 cents per share. Operating revenues dropped to $286.7 million compared with $294.7 million in third-quarter 2006. For the nine months ended Sept. 30, revenues were down 1.3% and operating income fell 13.3%.

The company has taken steps to stop the bleeding by streamlining the Shoppers segment from six operating units into three operating units, which now comprise California PennySaver, Florida Flyer and the Shopper digital unit. The new structure should allow the company to respond faster in a changing marketplace and better position itself to grow market share and reduce business costs.

Other changes made during the latter part of 2007 included the appointment of Blythe, who previously server as CFO, as president and the naming of Doug Shepard as his replacement. Blythe assumed the role previously held by CEO Richard Hochhauser. Shepard came on board after serving as CFO and treasurer of HVHC Inc.

Meanwhile, the company plans to open a customer care and tech support center in Texarkana, Texas, during the first quarter of 2008. The company expects to hire as many as 750 employees to work in the facility by the end of 2008.

In December 2007, the company said it was enhancing its Digital Practice by naming new leadership personnel, forming external partnerships and continuing product development of its Postfuture e-mail marketing platform.

The Digital Practice comprises more than 125 professionals who help clients devise digital strategy and employ digital media and communications. Among the Digital Practice personnel decisions was the promotion of Glen Hartman to the position of managing director. Hartman previously worked as senior vice president for digital marketing for data-based marketing solutions.

Harte-Hanks Inc.
At A Glance

Harte-Hanks Inc.
San Antonio, Texas
Primary Industry: Publishing and Printing
Number of Employees: 6,338
2006 In Review
Revenue: $1.2 billion
Profit Margin: 9.44%
Sales Turnover: 1.22
Inventory Turnover: 54.53
Revenue Growth: 4.38%
Return On Assets: 12.57%
Return On Equity: 19.91

Harte-Hanks also is partnering with online business optimization software provider Omniture Inc. to integrate Omniture's Genesis solution into the Postfuture platform. Omniture is designed to reduce the complexity of measuring online marketing campaigns to help refine offers and increase results. The Postfuture suite has undergone recent additions, including the Communicator 6.0 tool that enables behavior-driven "triggered" e-mail marketing programs based on responses and new data collected of e-mail recipients.

Despite the rough year, there was a silver lining for Harte-Hanks in 2007. Software Magazine ranked the company No. 51 on its list of top 500 software and service providers worldwide. The company also ranked second in the publication's "Software 500" Customer Relationship Management category.

The rankings take into account each company's software revenues with other sources of revenue, such as hardware sales, over the course of the calendar year. The financial information was gathered from Software Magazine's annual vendor survey, public documents, press releases, SEC filings and industry analysts. A technology consultant compiled the results and analysis.


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