Eden Prairie-based iMedia completes HQ sale-leaseback, still reports loss for 2022

Tim Peterman, chief executive of Eden Prairie-based iMedia Brands, started off his company's delayed Wednesday earnings call with a quote from boxer Mike Tyson: "Everybody has a plan until they get punched in the mouth."

The beleaguered media company — which owns shopping network ShopHQ and retailer Christopher & Banks — certainly has taken a few hits throughout the years as its leaders have tried to turn a profit. But toward the end of last year came the biggest blow yet.

In the fall, the company's liquidity came into question as it fell out of compliance with its major lender, forcing iMedia leaders to cut costs and find cash to make payments. The unplanned payments left iMedia underfunded to purchase inventory for the busy holiday season.

One of its answers to escape the bind was to sell its Eden Prairie headquarters and several other properties and lease them back to raise capital. However, the transactions delayed, only closing just this week.

Safe for now, iMedia leaders say they are in the process of picking up the pieces and trying to reinvigorate a company that was close to the brink.

"Completing our debt reduction event this week was a milestone win for us, but make no mistake, it was a struggle to complete," Peterman told analysts on a Wednesday morning earnings call.

After several delays, iMedia finally announced Wednesday its $48 million sale-leaseback deal. While the deal reduced the media company's debt, it was a little too late to boost its earnings. For fiscal year 2022, iMedia reported a $70 million loss, with $24 million of that coming during its final three-month quarter that ended Jan. 28.

A year before, its annual net loss was $22 million. But 2022 brought a six month-long blackout on satellite-TV Dish Network and year-end liquidity challenges. The company also had to spend $13 million to terminate its kitchenware licensing agreement with basketball star Shaquille O'Neal.

"Our teams and vendors are rapidly shifting their focus back to our normal day-to-day fundamentals. However, this is not an overnight fix," Peterman said.

iMedia shares were down about 20% for the day to nearly 42 cents.

It will take time for iMedia to regain the trust of Wall Street, said Tom Forte, an analyst for D.A. Davidson. However, given Peterman's experience in putting the company on the right track in the past and the recent improvements the company made, Forte said he believes iMedia will be able to turn around the business.

"The good news is they still have a core customer who continues to be resilient," Forte said.

iMedia's ShopHQ customers tend to be high earners and should be able to weather the current economic uncertainty with money still to spend on popular products like watches and jewelry, Forte said.

One question iMedia still hasn't answered is about the deadline to file a plan to correct the company's share price or file for an extension if it doesn't want Nasdaq to delist it from its stock exchange. In October, the Nasdaq stock market informed the company it was out of compliance with the minimum $1 bid price requirement.

During Wednesday's call, iMedia leaders didn't specify any plans to regain compliance. An iMedia spokesman said later "communication lines with NASDAQ on our alternatives are ongoing."

Besides the sales of three buildings, iMedia also raised $3.5 million by privately selling some of its shares to several investors, including members of the company's board and management. It also exchanged 10% of its stake in German channel 1-2-3.tv for a reduction in debt and secured a six-month forbearance to allow it more time to replace or refinance a 2021 loan from Connecticut-based Siena Lending Group. The company also paid off a $29 million loan and put $12 million toward paying a revolving loan.

Through that, iMedia lowered its debt by $53 million to about $123 million.

But the company suffered to get to this point, Peterman said. In February, iMedia shaved $20 million in operating expenses but more than half of that was connected with staffing changes.

Since late March, iMedia has postponed its earnings report three times to give it more time to complete its recent financial transactions. The most recent time the company produced a quarterly profit was summer 2020. Some segments of business have continued to do well, like Christopher & Banks, which iMedia acquired in 2021 and began to sell on its ShopHQ network with a few stores also re-opening.

In many ways, iMedia is taking its revitalization lessons from competitor QVC. QVC made $520 million by selling and leasing back six of its U.S. properties last year, like what iMedia just did with its Eden Prairie offices and studios as well as its Kentucky warehouse. QVC also created a chief transformation officer role, a position iMedia announced in a financial filing last week.

"While it remains a difficult road for [iMedia], they continue to fight to play another day," wrote Mark Argento, a founding partner and senior research analyst at Minneapolis investment bank Lake Street Capital Markets, in his Wednesday note to investors.