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 2013, HSN had affiliation agreements with 86 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 more than two-thirds 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.
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 $268 million, $245 million, and $215.5 million in 2013, 2012 and 2011, respectively.
The company has reported steady growth over the past few years. In 2013 HSN's revenues increased by 4% due to a growth in beauty and health, home design, and household sales, offset by lower jewelry, culinary, and electronics sales. Digital sales grew by 7% and penetration increased 160 basis points to 37% (up from 35.4% in 2012). Cornerstone's net sales rose by 9% due to sales growth in home brands (Ballard Designs, Frontgate, Grandin Road, and Improvements), and higher catalog circulation (primarily due to increased investment in circulation of its three largest brands: Frontage, Ballard Designs, and Garnet Hill).
Net income increased by 37% in 2013 due to revenue growth, decline in interest expenses, and the absence of a loss on debt extinguishment.
In 2013 HSN's operating cash flow increased by 57% to $232 million due to improved operating performance and changes in working capital (primarily as a result of lower inventory receipts, effective inventory management and the timing of collection of credit card receivables), offset by the timing of income tax 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 2013 teamed up with Disney to create an exclusive collection of fashions, jewelry, beauty and home accessories based upon one of the most anticipated films of the year, The Walt Disney Studios' Oz The Great and Powerful. That year 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.