The No. 2 home shopping network, HSN, saw its net sales dip 3 percent, to $557.2 million, in the second quarter versus the prior year, the channel reported on Thursday.
Sales in electronics and beauty rose, offset by decreases in other product categories and in shipping revenues, the network said in a press release.
Roughly one-third of the decline in net sales was attributable to the conclusion of a direct-response television marketing campaign in the prior quarter.
Digital sales increased 5 percent with penetration increasing 330 basis points to 43.6 percent. The return rate improved 60 basis points to 17.4 percent; units shipped decreased 2 percent; and average price point decreased 2 percent.
Gross profit decreased 6 percent to $197.1 million. Gross profit rate decreased 120 basis points to 35.4 percent, primarily due to an increase in shipping promotions, higher inventory reserves and changes in product mix. The change in rate was also negatively impacted by favorable settlements of vendor claims in the prior year.
Operating expenses decreased 9 percent to $142 million, primarily due to decreases in employee-related costs and bad-debt expense and a $3 million charge in the prior year related to the planned closure of one of HSN’s distribution centers.
Excluding non-cash charges and the $3 million severance charge, operating expenses as a percentage of net sales were 23.5 percent compared to 24.7 percent in the prior year.
Operating income increased 3 percent to $55.1 million. Adjusted EBITDA decreased 3 percent to $66.3 million.
“HSNi’s results were impacted by the performance of certain merchandising categories at HSN as well as a weaker season and a greater promotional environment in the outdoor business at Cornerstone,” HSN Inc. CEO Mindy Grossman said in a statement.
Cornerstone Brands, the catalog company, along with the HSN TV network is part of HSN Inc.
“Recognizing that we are navigating in a challenging macro environment, we are focused on execution, combined with disciplined operating expense management and optimizing operational efficiencies,” Grossman said.
“At HSN, we are accelerating our targeted customer acquisition strategies and intensifying our efforts to drive product demand through proprietary products, new programming, and partnerships to improve our top-line performance,” she said.
“At Cornerstone, we are concentrating on the brands within the portfolio that have the greatest growth opportunities, including our expanded retail distribution channels. As a result of this strategic focus, we have entered into a letter of intent to sell our TravelSmith and Chasing Fireflies businesses.”
HSN also announced that Judy Schmeling, currently HSN’s chief operating officer and chief financial officer, has been appointed president of Cornerstone.
“In addition to her new role, she will continue to serve as COO of HSNi and will remain CFO during the transition until a permanent successor is appointed,” Grossman said.
“Judy has extensive strategic and financial expertise and over 20 years of experience at the company across all areas of the business. I have great confidence that she is the right leader to drive the Cornerstone business.”
Sales for HSN Inc., both HSN and Cornerstone, decreased 4 percent to $854.3 million. Cornerstone’s net sales decreased 5 percent to $297.1 million.