HSN moves ahead in 2Q

Retail Editor 8, August 4, 2010

St. Petersburg, Fla. - After acting as a drag on earnings for several quarters, HSNi's Cornerstone division showed robust increases in operating profit, gross margin and sales during the second quarter and posted its best comp growth since 2005.

Catalog/ecommerce nameplates Ballards, Frontgate and Garnet Hill drove the division's increase, while signs of a turnaround were less evident at Improvements, Smith + Noble, The Territory Ahead and TravelSmith, executives said during the company's quarterly conference call today.


The division is "very focused on ecommerce," said HSNi ceo Mindy Grossman. The Cornerstone brands are evolving into online businesses, with the catalogs transitioning into marketing tools, she added.

While apparel was a big seller at Garnet Hill, Grossman also called out Eileen Fisher and the recently launched Lili Pulitzer Home brands as solid contributors.

At Ballards, "new products are making the difference," she said. Frontgate's sales were led by outdoor furniture, which is typical performance for second quarter.

The HSN television shopping and ecommerce division also saw improvement, although less dramatic.
Total corporate net income for the second quarter ended June 30 nearly doubled to $24.7 million, or 42 cents per share, from $13.6 million, or 24 cents per share, in last year's 2Q.

Operating income rose 20% for HSN and 589% (sic) for Cornerstone, with gross profit of 6% and 22%, respectively.
Total sales in the second quarter rose 7.8% to $690.0 million. Sales in the HSN division rose 3% to $466.4 million, while sales at the Cornerstone division jumped 20% to $223.6 million. 

For the six-month period, operating income more than doubled to $85.8 million from $44.6 million in the year-ago period. Sales rose 8% to $1.27 billion. 

Grossman cautioned analysts against expecting similarly spectacular gains going forward, especially at Cornerstone. 

"We are playing to a consumer who is unsure from day to day and therefore inconsistent," she said.


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