BlueSky’s Outlook: Not Good

Two weeks after MULTICHANNEL MERCHANT first reported on the financial turmoil at multititle mailer BlueSky Brands, the situation has rapidly deteriorated. Several industry sources report massive layoffs at most of the company’s catalogs, leaving the future of BlueSky Brands in doubt.

Created in 2005 by private equity firm Reliant Equity Investors, BlueSky Brands is the parent company of the Paragon Gifts, Bits and Pieces, Bits and Pieces U.K., National Wildlife Direct, and Wintherthur catalogs—or what’s left of them. The entire staff of the Paragon was let go on Friday, according to one source.

Another source says that most of the National Wildlife employees were laid off last Friday, and the Winterthur title was down to a skeleton staff. Bits and Pieces was said to be the only title still fully staffed; an employee who answered the telephone there hung up when told a reporter from MULTICHANNEL MERCHANT was calling.

Repeated calls to BlueSky Brands CEO Robert Pulciani, Reliant Equity Investors, and all of the catalog titles were not returned by press time. The company also owns McLean, VA-based third-party fulfillment provider AB&C Group; a former AB&C employee confirmed that there had been layoffs in that division in February, but exact figures were not available.

“A lot of merchants are experiencing tough times,” said Jean O. Giesmann, former senior vice president of creative for BlueSky Brands and president of NEMOA in addressing NEMOA members at the trade group’s spring conference today in Cambridge, MA, “and I’m experiencing it first hand.”

Giesmann declined further comment on BlueSky, but she confirmed to MULTICHANNEL MERCHANT at the show that she and Paragon Gifts president Brad Bishop had been laid off on Feb. 29.

BlueSky has not paid several of its vendors in months, according to merchandise suppliers for the Paragon. A service provider for one of the other titles also reported numerous outstanding invoiced. (Vendors involved in litigation for payment declined to speak on the record.)

A July 2007 letter from Bishop told Paragon vendors that the cataloger was in a “temporary cash crunch” and not able to pay them on time. That may be why Paragon in August sold its Westerly, RI, facility. (Before the past two rounds of layoffs at the catalog, BlueSky Brands had planned to Paragon’s operations to a Martinsburg, WV, facility by the end of this month.)

The Westerly location was sold to a Pennsylvania firm whose company name is listed on assessor’s documents as 89 Tom Harvey LP & EFFE LLC (89 Tom Harvey Rd. is the building’s address). But the nearly 131,000-sq.-ft. facility, which sits on 10.7 acres, is valued at close to $5.4 million; the building sold for $3.45 million.

What caused the business to go downhill in less than three years? By several accounts, BlueSky Brands incurred too much debt in its acquisitions. One source who requested anonymity describes the company’s strategy as “a gross mismanagement from the beginning.”

In particular, says the same source, the National Wildlife and Winterthur titles were in debt to begin with when BlueSky acquired them in November 2006. BlueSky did not ever have deep enough pockets to reinvent the company and sustain the loss, the source notes.

What’s next? Some sources say BlueSky Brands needs to sell one of its brands—immediately–to cover debt. And if it doesn’t, one source says the business faces a shutdown.

One thing’s for sure: The company’s meltdown is a huge blow, not only for the employees, suppliers, and customers, but for the entire industry.—Additional reporting by Tim Parry

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