No need to worry about normal business hours when shopping with this retailer. HSN (known to night owls and from-the-couch shoppers as Home Shopping Network) operates a home shopping television network, which reaches some 95 million US homes, and a fast-growing online business HSN.com. In general, HSN sells apparel and accessories, jewelry, electronics, housewares, and health, beauty, and fitness products. Its Cornerstone Brands business is a catalog and Internet retailer whose titles include Garnet Hill, Ballard Designs, and TravelSmith, among others. The segment also operates about 12 retail shops.
In 2014, HSN had affiliation agreements with 87 broadcast television stations for leased carriage of the HSN television network with terms ranging from several weeks to several years. HSN also includes HSN.com, a transactional e-commerce site that sells merchandise offered on the HSN television networks, as well as select merchandise sold exclusively on HSN.com.
HSN.com, which features more than 50,000 product videos available for sale, has grown to account for more than 40% of HSN's total sales. HSN2 (launched in 2010) is a network that distributes taped programming on a limited distribution basis. The company's broadcast and online media activities account for 70% of sales, while Cornerstone Brands' catalogs, websites, and retail stores bring in the rest.
Cornerstone's home and apparel lifestyle brands include Ballard Designs, Chasing Fireflies, Frontgate, Garnet Hill, Grandin Road, Improvements, and TravelSmith.
HSN subsidiary Ventana Television also owns 25 broadcast television stations that carry the HSN television networks on a full-time basis.
Sales and Marketing
HSN offers retail experiences on TV, online, via mobile devices, in catalogs, and in brick and mortar stores. Cornerstone distributes 320 million catalogs annually, operates eight separate digital sales sites and operates 11 retail and outlet stores.
HSN has multi-year distribution and affiliation agreements with cable television, Telco and DBS operators, to carry HSN television networks, as well as to promote the networks by carrying related commercials and distributing related marketing materials to their respective subscriber bases. HSN’s larger pay television operators include Comcast, DirecTV, Echostar/DISH, and Time Warner Cable.
It reported advertising expense of $279.6 million, $268 million, and $245 million, in 2014, 2013, and 2012, respectively.
The company has reported steady revenue growth over the past five years. In 2014 its revenues increased by 5% due to sales growth across all of its divisions (except jewelry) with major growth in the home design category. Digital sales grew by 14% (with penetration increasing 240 basis points to 39.4%, up from 37.0% in 2013). Cornerstone’s net sales grew by 2% due to sales growth in the home brands, partially offset by lower sales in its apparel brands, particularly Garnet Hill.
Despite the growth in revenues, HSN’s net income decreased by 3% in 2014 due to higher operating expenses (including selling and marketing and general and administrative). The increase in income tax provision also contributed to the drop in net income.
Operating cash flow decreased by 40% in 2014 due to an increase in inventories and accounts receivable. Inventories grew as HSN normalized its inventory levels to support future sales growth, made strategic investments in certain proprietary product categories and enhanced its digital offerings. The rise in accounts receivable was due to HSN's sales growth and an increase in its offering of Flexpay (an installment program allowing customers to pay for select merchandise in two to six interest-free, monthly payments).
Growth engines for the company include digital sales and Cornerstone Brands, which are both posting double-digit sales increases.
As part of HSN's entertainment strategy, it participates in joint marketing and promotional partnerships with major motion picture companies as well as well-known recording artists. HSN also creates strategic alliances with world-class, consumer brands in an effort to reach new prospects through relevant brand integrations and occasion-based event marketing.
In 2015 HSN launched the 'Modern Princess Collection by Coco Rocha' as part of a marketing collaboration with Walt Disney Studios for the Cinderella movie. The capsule collection, which features some of HSN's top designers and brands across fashion, footwear, jewelry, accessories, home and beauty, is part of a larger assortment of merchandise inspired by the movie.
In 2014 the company signed a multi-film marketing collaboration with Disney for three films, Maleficent, Cinderella, and The Hundred-Foot Journey; in 2013 it partnered with Disney on Oz The Great and Powerful.
In 2013 the company and Univision teamed up to launch an integrated marketing partnership.
The HSN business, which generates more than two-thirds of the company's sales, boasts a flexible business model that enables the retailer to quickly change its merchandise mix to meet customer demand. Being able to react quickly allowed the company to weather the recession and remain profitable.