In the past Discovery has been a company with several owners and its hands in too many cookie jars. With the goal of becoming a publicly traded company, they bought out one of their owners, Cox Communications recently, and now had announced they're closing their retail outlets. The purpose of all of this is to make itself more attractive to investors when they go public.
Discovery hopes to have all stores located in malls or stand-alone stors closed no later than early fall. They do have seven store located in airports run and licensed by the Hudson Group which they will keep open.
The other major driver of the closing of the stores has been the online success of the products the company offers, which have increased by 144 percent in 2007, over 2006 sales.
Discovery CEO David Zaslav said, "We realized we could reach millions of people without having to build out an independent chain of stores, have a staff, pay for the lights and air conditioning and absorb other costs associated with maintaining stores."
Along with their online sales, the company is also able to get rid of the stores because they're entering into partnerships with existing retailers to offer their products in a physical setting. Once such deal is with Toys R Us, where they'll supply 550 of their stores with merchandise connected to their popular Animal Planet channel.
The stores they're closing did generate $130 million in revenue last year but they lost $30 million nonetheless. Obviously the company was in a business beyond their expertise. The company figures to save $75 million by closing the stores. They did try to sell them but couldn't find any interested buyers.
This will also put the company on more solid footing, as they did increase their first quarter revenue by 10 percent to end at $728 million. Operating cash flow was also up by 24 percent to $180 million.
If this growth continues while they divest themselves of the stores, it could put them in a very strong position to be taken public.
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