It looks like HSN had a tough first quarter. But it’s bringing a new jewelry exec, a QVC alum, on board.
The No. 2 home shopping network reported on Wednesday that its first-quarter net sales were $578.4 million, down 4 percent from the year-ago period. Operating income decreased 10 percent to $49.6 million.
Sales in electronics, wellness and culinary rose, offset by decreases in other categories. About half of the decline in net sales was attributable to the conclusion of a direct-response television marketing campaign during the current quarter.
“We deliberately wound down our Keith Urban infomercial in the first quarter, an area we always viewed as opportunistic, and this impacted our sales decline by 2 percent,” CFO Judy Schmeling said during a call with Wall Street analysts, according to a transcript from Seeking Alpha.
“Our performance in the quarter reflected the impact of the volatile retail environment combined with the repositioning of our product portfolio,” HSN CEO Mindy Grossman said in a canned statement.
“We continue to invest strategically in digital, data analytics and content while aggressively managing overall expenses in the business. Restoring top-line growth remains our top priority as we make progress in re-energizing certain merchandising categories and brands that we believe will build momentum at HSNi as the year progresses.
“Digital — now representing over half our sales — remains a key area of strategic focus and we continue to pursue opportunities to optimize our distributed commerce platforms,” Grossman said. “We are confident that as we accelerate our differentiated product pipeline, expand our content and reach and leverage new partnerships and platforms, we will be well positioned for long-term sustainable growth.”
Digital sales increased 4 percent, with penetration increasing 310 basis points to 43.8 percent. The return rate improved 90 basis points to 16.8 percent and average price point decreased 5 percent, primarily due to changes in product mix.
Grossman had some good news for us bling hounds, according to Seeking Alpha.
“Jewelry was down in the quarter but driven by a reduction in airtime as we continue to refine our assortment,” she said.
“We are having success in fine jewelry, particularly in gold, diamonds, and pearls as well as in our elevated fashion collection. I’m pleased to say that given the progress we have made against our new strategy, over the course of the year, we will be reinvesting in airtime against these key businesses including the successful relaunch of our fine jewelry experience on-air just last month in our 24-hour fine jewelry event.
Grossman added, “In addition, we are extremely excited that veteran jewelry industry executive, Catherine Coquillard, joins the team as Senior Vice President of Jewelry at the end of the first quarter. Catherine brings more than 20 years of leadership positions within jewelry including Helzberg Diamonds and QVC. We look forward to her meaningful contributions to the business.”
Gross profit decreased 4 percent to $199.3 million. The gross profit rate decreased 10 basis points to 34.5 percent primarily due to an increase in shipping promotions and changes in product mix, offset by lower procurement costs.
Operating expenses (excluding non-cash charges) decreased 2 percent to $138.6 million, which included lower costs for direct-response television marketing.
Adjusted EBITDA decreased 8 percent to $60.7 million.
Net sales for HSN Inc., which include the home shopping network and the Cornerstone catalog unit, decreased 3 percent to $816.8 million.