HSN 2Q Sales Dip 4 Percent, To $532.2 Million

Looks like the second quarter another was a tough one for home shopping networks.

On Thursday HSN reported that its net sales for the quarter were $532.2 million, a 4 percent drop from the prior year. Sales grew in wellness and home, offset by decreases in electronics, beauty and jewelry.

The earnings press release talked about Liberty Interactive Corp.’s pending acquisition of HSN.

“We continue to focus on building our proprietary product pipeline which we believe will ultimately lead to growth in the business,” HSN Inc. Chief Financial Officer Rod Little said in a canned statement. “The continued strength of digital sales, and mobile sales in particular, has been very encouraging with digital sales now representing 55% of our total revenue. Mobile, which we see as our flagship, continues to be our fastest growing sales channel and a source of new customer acquisition.”

“As we prepare for the pending acquisition by Liberty, we remain committed to our strategies to improve performance both in the short and long term,” he said. “Our key priorities remain: acquiring and retaining customers via a robust and relevant product portfolio, optimizing our digital platforms and improving efficiencies throughout the business, all to drive consistent shareholder value creation.”

The No. 2 home shopping network said shipping revenue decline primarily due to the August 2016 changes in the standard shipping rates and increased promotions. The average price point decreased 7 percent, while units shipped increased 2 percent largely due to changes in product mix, according to the press release.

Gross profit decreased 5 percent to $186.8 million. Gross profit rate decreased 30 basis points to 35.1 percent, primarily due to a decrease in shipping revenue and higher shipping and fulfillment costs, partially offset by higher product margins and lower inventory reserves due to a change in accounting estimate.

The increase in shipping and fulfillment costs was primarily due to annual outbound rate increases and implementation costs associated with HSN’s ongoing supply-chain optimization initiative, the network said.

Operating expenses increased 4 percent to $147.6 million driven by about $3.7 million in transaction costs related to the merger agreement, an increase in employee-related costs, higher costs incurred as part of the supply-chain O initiative and an increase in bad debt expense, partially offset by lower stock-based compensation expense primarily due to the departure of CEO Mindy Grossman during the quarter.

Excluding non-cash charges and transaction costs, operating expenses increased 4 percent and were 25.6 percent as a percentage of net sales compared to 23.5 percent in the prior year.

Operating income decreased $15.9 million, or 29 percent, to $39.2 million. Adjusted EBITDA decreased $15.8 million, or 24 percent, to $50.5 million. The supply-chain implementation resulted in an additional $2.9 million of costs in the second quarter, which impacted gross profit and operating expenses.

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One Response to “HSN 2Q Sales Dip 4 Percent, To $532.2 Million”

  1. Joe Says:

    Mike George will help you guys by eliminating your jobs, he tends to be very good at that, a true American treasure.

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