Discovery to close 103 retail stores, 3 in Maryland

1,000 employees face layoffs as focus shifts to online sales

May 18, 2007|By Hanah Cho | Hanah Cho,Sun reporter

Discovery Communications of Silver Spring is closing its 103 retail stores - including three in Maryland - and laying off 1,000 employees to focus on selling its products online and through mass-market retailers, the company announced yesterday.

After studying its retail business this year, Discovery, which operates its namesake cable channel and other channels, said it could expand its merchandising and sell its branded products more efficiently through a combination of online sales and partnerships. It already has deals with more established chains such as Toys "R" Us.

The media company, which also produces cable channels TLC and Animal Planet, operates an e-commerce site, along with selling merchandise on Web sites such as and eBay.

The company said it is exploring other avenues for product sales, including using its networks.

"By eliminating our owned-and-operated brick-and-mortar storefronts, which are cost-intensive and complicated businesses, Discovery can focus its efforts on high-growth e-commerce and licensing operations," Discovery President and Chief Executive Officer David M. Zaslav said in a statement yesterday. "While retail is historically not the core competency of global media companies, there is strong consumer demand for Discovery's branded product lines."

Retail store employees who are losing their jobs represent 25 percent of Discovery's work force, the company said.

Store closings are expected to occur by the end of the third quarter.

In Maryland, Discovery operates stores in Baltimore's Harborplace, Annapolis and Bethesda. Officials at Harborplace did not have details about the future of the store yesterday.

Discovery entered retailing in 1998, tapping into a trend that combined entertainment, shopping and education. At one point, the media company operated 120 Discovery Channel stores but began closing unprofitable outlets several years ago, analysts say.

As with many traditional media companies, Discovery is facing increasing competition from the Web and other forms of electronic media.

Seven Discovery Channel Airport Stores, operated by Hudson Group, will remain open, the company said.

Discovery's decision to close its retail stores comes a month after the company laid off 200 corporate workers to trim costs.

Andrew Baker, an analyst at Cathay Financial, said Discovery's move to shed its storefront retail operations was a positive move.

"They lose tens of millions of dollars a year," Baker said. "The company for awhile maintained that it's important branding for the company. What they're acknowledging is that the stores are losing money but we could get our brand out there through other channels."

Discovery reported a $121.5 million loss in its commerce and education division last year, according to an annual report filed by Discovery Holding Co., which owns a 66 percent stake in the cable company. That business segment includes retail store operations, direct consumer marketing and education sales and services to schools.

First-quarter profit at Discovery Communications rose 1.8 percent to $43.1 million from a year earlier, Discovery Holdings said last week. Revenue rose 10 percent to $728 million.

This week, Discovery Communications completed a transaction that included buying a 25 percent stake in Atlanta-based Cox Communications Inc. Cox received $1.3 billion and ownership of the Travel Channel.

The Cox transaction increased the stake held by Discovery Holding Co., controlled by billionaire John C. Malone, from 50 percent to 66 percent. Advance/Newhouse Communications owns the other 33 percent.

Bloomberg News contributed to this article.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.