HSNi operates two main segments: HSN and Cornerstone. The HSN segment includes broadcast and online media activities and accounts for around 70% of sales. The HSN segment 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. The e-commerce site, which features more than 50,000 product videos available for sale, has grown to account for nearly half of HSN's total sales.

The Cornerstone Brands segment (30% of sales) sells through its catalogs, websites, and 15 retail and outlet stores. Cornerstone's home and apparel lifestyle brands include Ballard Designs, Frontgate, Garnet Hill, Grandin Road, and Improvements.

HSNi has more than 100 affiliation agreements with broadcast television stations for leased carriage of the HSN television network with terms ranging from several weeks to several years. Subsidiary Ventana Television also owns 25 broadcast television stations that carry the HSN television networks on a full-time basis. HSN2 is a network that distributes taped programming on a limited distribution basis.

Geographic Reach

St. Petersburg, Florida-based HSNi serves customers across the US from leased fulfillment centers in Fontana, California; Roanoke, Virginia; Ronkonkoma, New York; and Greeneville, Tennessee. It also has five outlet stores and various administrative offices and data centers across the US. Cornerstone leases fulfillment centers in West Chester, Ohio; Monroe, Ohio; and Phoenix.

Sales and Marketing

HSNi offers retail experiences on TV, online, via mobile devices, in catalogs, and in brick and mortar stores. Cornerstone distributes more than 310 million catalogs annually, operates eight separate digital sales sites and operates more than 15 retail and outlet stores. Sales from mobile devices grow each year and account for more than 20% of sales.

HSNi 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.

Financial Performance

HSNi's rapid sales growth since 2011 slid back in fiscal 2016, falling 3% to $3.6 billion amid falls in both the HSN segment and Cornerstone. Increased competition meant HSNi conducted more promotional activity, driving down realized prices. The company also sold off its TravelSmith and Chasing Fireflies brands in the Cornerstone segment mid-year.

Net income fell 30% to $118.7 million due mostly to impairment charges of $31.2 million on the sold-off Cornerstone brands. Lower sales volume and pricing also had a negative impact on net income. These factors were offset by cost cutting initiatives, which were mostly focused on HSNi's catalog business.

Cash from operations increased 16% to $236.5 million due to lower investment inventories, relating to the sold-off brands, and the timing of accounts payable.

Strategy

The irresistible rise of e-commerce disrupted HSNi's business model as home shoppers increasingly rely on the internet for purchases. HSNi responded by becoming an e-commerce retailer in its own right -- every year it grows its percentage of sales made online, which in 2016 ticked past 50% of total sales. The company also puts an emphasis on sales from mobile devices (smart phones and tablets), with sales from the channel passing 20% of total sales in 2016 as well. HSN integrated a gamification strategy into its e-commerce platform to promote customer loyalty and engagement.

In a major move, HSNi agreed to its acquisition by longstanding rival QVC in 2017. With both companies recording unfavorable revenue trends in recent years, the acquisition reflects that the former rivals' biggest competitors are no longer each other, but e-commerce giants such as Amazon.

HSNi continues to reshape its Cornerstone business. In 2016 it sold off its underperforming apparel brands TravelSmith and Chasing Fireflies, freeing up cash to expand the segment's physical footprint. It opened five Ballard Design retail stores and one Frontgate store in 2016-17.

Company Background

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.