Sans Suzanne Somers, HSN Sales Dip 1 Percent In The Third Quarter, But Earnings Skyrocket

Suzanne Somers

The No. 2 home shopping network HSN saw its net sales slip 1 percent in the third quarter, versus growth of 4 percent in the prior-year period, the company reported Thursday. But earnings rose sharply.

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. However, operating income increased 115 percent to $37.1 million compared to $17.3 million in the prior year.

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 and the gross profit margin improved 310 basis points to 36.1 percent in the third quarter compared to 33 percent in the prior year. The significant improvement in gross profit was due to a reduction in inventory reserves, improved product margin and net shipping and handling costs.

“In our first year as an independent public company, we have clearly demonstrated our ability to leverage our differentiated business model, strengthen our foundation and exert strict financial and operational discipline to maximize results,” HSN CEO Mindy Grossman said in a prepared statement. “Despite the continued macro-economic challenges, we emerged as a stronger company at the end of the third quarter with EBITDA growth of 30 percent and $238.7 million in cash.”

For the first nine months, HSN’s net sales slipped 1 percent, to $1.396 billion from $1.410 billion in the year-ago period.

In the third quarter HSN’s shipped units increased by 6 percent while the average price point decreased by 6 percent as a result of a continued focus on key items and price/value. Return rates improved by 80 basis points due to improved product quality, apparel fit initiatives, and lower price points.

HSN.com net sales grew 7 percent over the prior year following 17 percent growth in the prior year. Sales from e-commerce represented 29.8 percent of HSN’s total net sales, up from 27.6 percent in the prior year.

“At HSN, sales momentum continued to build as the quarter progressed,” Grossman said. “Our strategy of driving customer engagement through unique interactive experiences, differentiated brands and products, and a continued focus on customer service resulted in a 6 percent increase in unit sales and best customer growth of 7 percent. And 10 years after the launch of hsn.com, we now have one of the most video pervasive sites in e-commerce and our hsn.com sales penetration now represents 30 percent of our total business.”

The improvement in net shipping and handling was due to lower fuel costs and warehouse productivity improvements. Gross profit margins also benefited from a reduction in inventory reserves related to HSN’s inventory levels. Continued efforts on aligning inventory purchases with sales demand and reducing aged inventory resulted in a decrease in inventory by $39.6 million, or 15 percent, compared to the same period last year.

Adjusted EBITDA increased 32 percent to $47.1 million in the third quarter compared to the prior year as a result of the increase in gross profit.

“We remain on the forefront of transactional innovation,” Grossman said. “In addition to launching the first live in-flight television shopping experience, we are the only retailer streaming live video across three different screens – television, online and mobile and we continue our roll-out of Shop by Remote, the only interactive shopping platform of its kind in the U.S. We are excited about our opportunities as we continue to fully maximize our capabilities combining innovative products and lifestyle brands with our unique ability to interact with our customers across multiple platforms.”

For The Curious: A Video Clip Of Long-Winded HSN CEO Mindy Grossman Talking Numbers

We guess we just never noticed this, but it popped up when we opened the “company overview” section of HSN’s Web site Saturday. It’s a video clip of the network’s CEO Mindy Grossman.

Take a look. We know you’re curious about her.

This is the “Mindy” that host Colleen Lopez frequently refers to, citing her great taste (nothing like buttering up the boss).

It’s a rather long and long-winded video of Grossman talking about HSN’s 2008 financial results, its inaugural annual report. It’s our first look at her in action.

In the clip Grossman talks numbers: HSN had $2.8 billion in net sales in 2008; 90 million subscribers; and $97 million in free cash flow.

“We are the new retail frontier,” she says.

The clip is a bit tedious and not very sexy, but remember it’s aimed at investors and Wall Street. Still, we would have liked more pizzazz.

Grossman will be in action Nov. 12, when she reports HSN’s third-quarter earnings.

Does HSN Miss Suzanne Somers? We’ll Find Out When HSN Reports Third Quarter Earnings Nov. 12

The No. 2 home shopping network HSN will report its third-quarter earnings Nov. 12, before the market opens, the company said Thursday.

CEO Mindy Grossman and Judy Schmeling, executive vice president and chief financial officer, will hold a conference call at 11 a.m. Eastern Time to review the results.

Red-Carpet Designer Badgley Mischka Joins The Parade To HSN With New Line

Yet more luxury fashion designers are taking the plunge and bringing their wares to a home shopping network. Now Badgley Mischka, purveyor of red-carpet fashion, has signed a licensing deal with HSN to sell apparel, accessories and jewelry “at accessible price points” on the channel.

Badgley Mischka, owned by Iconix Brand Group, will launch its American Glamour collection with HSN during a special two-hour primetime show featuring Mark Badgley and James Mischka at 9 p.m. on Nov. 17, HSN said Thursday.

Prices will range from $39 to $499. “The exclusive new line will convey the key elements of glamour and sophistication that Badgley Mischka is famous for to classic essentials that can transition from day to evening,” according to HSN’s press release.

The famous fashion duet has already been expanding beyond the couture world, with a line of fashion jewelry sold at retailers such as Lord & Taylor. The pieces are huge, with enormous rhinestones and crystals, suitable for black-tie events, clubbing and weddings.   

“We are very pleased to be launching American Glamour with HSN,” Badgley and Mischka said in a canned statement. “It is exciting to be able to reach out directly to both existing and new customers and offer them glamorous and chic pieces that transition from day to evening easily and are quintessentially Badgley Mischka.”

HSN CEO Mindy Grossman chimed in, saying, “Badgley Mischka is a leading fashion brand and we are thrilled to have Mark Badgley and James Mischka be a part of the HSN family. Through the partnership with HSN, American Glamour will now provide women access to a brand they may not have been able to consider before. HSN is excited to bring such an innovative and well-recognized design duo to the forefront of the home shopping market.”

Over the past 20 years, Badgley Mischka has become a worldwide brand. The label includes: Badgley Mischka Couture, Eveningwear, Mark & James Contemporary Collection, Handbags, Eyewear, Footwear, Accessories, Jewelry, Watches, Swimwear, Fragrance, Home, Bridal and Bridesmaids.

Badgley Mischka is sold in stores including Bergdorf Goodman, Neiman Marcus, Saks Fifth Avenue and Holt Renfrew.

The American Glamour line will also be available online at www.hsn.com starting Nov. 15.