HSN CEO Mindy Grossman
Even though its third-quarter sales slipped a hair, HSN has momentum and is upbeat about the coming holiday season, according to company officials.
During a third-quarter conference call Thursday, HSN CEO Mindy Grossman fielded questions from Wall Street analysts about the company’s outlook for the rest of the year.
“We’re optimistic going into the fourth quarter and seeing the trends continue from third quarter across multiple categories of the business, whether it’s new innovations in technology or, as you mentioned, in the ‘Her Side’ of the business,” Grossman said.
“We feel that both from an inventory perspective and a product-pipeline perspective we’re very well positioned going and in the quarter from everything from our gift strategies all the way to some of the new product introductions that we have had a lot of success with consistently,” she said.
Net sales for the HSN network and Web site (excluding HSN Inc.’s Cornerstone unit) decreased in the quarter to $467 million, versus $471 million last year, down 1 percent. However, operating income increased 115 percent to $37.1 million compared to $17.3 million in the prior year.
Chief financial officer Judy Schmeling said that the “slight sales decrease” was a reflection of the 6 percent lower-average price point for HSN items in the quarter, incuding an 18 percent decline in the average price point for the Today’s Special, “rather than any sizable mix shift.”
The network’s return rate dropped to 19.5 percent in the third quarter from 20.3 percent in the prior period; and inventory was down 15 percent.
In contrast to HSN, QVC saw its sales rise slightly in the third quarter. Earlier this week, QVC domestic posted $1.098 billion in revenue in the third quarter, a 2 percent increase from $1.073 billion in the year-ago period.
At HSN in the third quarter, gross profit increased 8 percent to $168.6 million. Unit growth was up 6 percent.
The No. 2 home shopping network has seen growing success with its fashion, beauty and jewelry lines, the “Her Side” of the business, according to Grossman.
“We have transformed our fashion businesses, exited unproductive brands and invested in the creation and developmemt of proprietary lifestyle brands with talented individuals who can bring a unique point of view to our customers,” Grossman said.
She cited as examples red-carpert designers Bagley Mischka, actress Molly Sims, rock star David Bowie’s model wife Iman and tennis champ Serena Williams. There was no mention of actress-author Suzanne Somers moved from HSN to ShopNBC during the third-quarter.
“It is important to note that at HSN we don’t just buy brand,” Grossman said. “We partner with visionaries, experts and design authorites to build propriety brands and bring them to life in unique and compelling ways.”
The CEO cited the line by Stefani Greenfield, Curations.
“We are now recognized in the fashion industry as a destination with strong leadership, innovation and a successful track record,” Grossman said.
In terms of the beauty category, HSN has added brands such as Benefit and Lancome, as well reaping success with its proprietary brands, such as Jennifer Stallone’s Serious Skin Care and FranBrand, the skincare line launched this week kby actess Fran Drescher.
HSN’s launch of Serious Skin Care’s Firma-Face in just four days in September sold almost 100,000 units, and more than 60 percent of customers signing up for Autoship, to ensure regular delivery, according to Grossman.
HSN has adjusted its jewelry product mix, resulting in unit growth of 13% this quarter, she said. Silver and fashion jewelry continue to be strong, with sales up 30 percent over last year “as customers responded to our wider range of price points and new designer introductions,” Grossman said.
She added that she is looking forward to the launch of Molly Sims’ jewelry line, Grayce, later this week.
Despite the dire economny, there was a 7 percent growth rate in sales from HSN’s best customers.
“We have been very focued in that segment of our business, and what we are seeing is her continuing to buy across multiple categories,” Grossman said
She explained that HSN is offering “The World of Carlos Falchi” and “Global Chic” from Iman.
Those are “businesses that completely go across jewelry, apparel, accessories, beauty, etc.,” Grossman said, noting that HSN’s viewers are “buying across multiple categories and we’re seing the increase in that best customer in the number of purchases she’s been making.”