Leaner HSN Slows Margin Decline
Cecile Corral -- Furniture Today, November 12, 2007
New York —It looks like the “S” in HSN could have stood for success last quarter: IAC/InterActiveCorp., parent of diversified direct-to-consumer retailing and marketing entities, beamed during its recent third-quarter earnings call about the upswing in the TV and internet retailer Home Shopping Network, or HSN, which grew in revenue by 5% while improving other metrics.
“At HSN we made the progress that we had hoped for when we last spoke to you,” Thomas McInerney, evp, cfo, told analysts. “For the quarter, HSN grew 5% with very consistent growth in each month of the quarter. Our gross margins were down 140 basis points year over year … this was significantly better than the second quarter when we saw more than twice that rate of decline.”
He also touted HSN's recent improvement in inventory, an issue “that has plagued us all year,” McInerney said. But “we finished the third quarter with $6 million more inventory than the prior year. This figure is down from $49 million in the first quarter and $18 million in the second quarter.”
Having recently gone through a merchandise overhaul and a shift in its team, HSN's business “now has a clear and differentiated brand identity and ... continues to increase the pace, newness and variety of products on air and online,” said Doug Lebda, president and coo.
The retailer's ecommerce site, www.HSN.com, continued to grow during the quarter at a double-digit rate following its July 31 relaunch. Sales and margin were up in almost every category, traffic grew 7% compared to last year, and conversion was up 20 basis points, Lebda said.
“And we've changed our merchandise strategy to have much more only-dot-com merchandise to really widen assortments there,” he continued. “We use it as a vehicle to keep existing customers and attract new ones.”
The site now includes virtual hosts and personalities, original content, interactive blogs and more than 8,000 video product demonstrations.
On another marketing angle, following the unprecedented success of its partnership with Elle magazine for Fall Fashion week, HSN will soon expand its print coverage in the fourth quarter to include other sponsorships aside from Elle, such as Gourmet magazine to feature HSN's chefs and Allure for HSN's expanding beauty category.
Net income for the third quarter at IAC fell 4.2% to $71.8 million from $74.9 million in the year-ago period. Sales however, rose 7.4% to $1.52 billion from $1.41 billion.
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