HSNi Marks Fourth-Quarter Turnaround
March 7, 2010-- Home Textiles Today,
While non-store retailer Cornerstone has not been the bright star of HSNi over the past year, this division made a “turnaround” in the fourth quarter, and by association home decor is also on the road to recovery.
“We are clearly seeing a turnaround of the [Cornerstone] business,” said Judy Schmeling, evp and cfo of HSNi. “This is the result of our new merchandising and creative strategies put in place earlier in the year – tightly managing expenses and a significant improvement in gross profit.”
Added Mindy Grossman, ceo and director of HSNi: “At Cornerstone, we are particularly encouraged by the significant improvement of our three flagship brands -- Frontage, Ballard Design and Garnet Hill. And we are particular encouraged by the results of our two home brands – Frontgate and Ballard Designs.”
But Cornerstone was not alone. The performance of Home Shopping Network (HSN) exceeded the company’s expectations, Grossman said, “by any measure…and we are thrilled with our record-breaking fourth quarter results.”
Both segments – HSN and Cornerstone – had “great momentum going into the quarter,” she said.
A highlight for the quarter ended Dec. 31 was quarterly net income of 68 cents per share compared to the loss of $38.29 per share in the prior year, when results included non-cash asset impairment charges of $2.9 billion to reduce the carrying value of goodwill and intangible assets, part of the aftermath of the HSNi spinoff from Barry Diller’s holding company. The asset impairment charges on an after-tax basis were $2.2 billion.
More good news from Q4 included an 8% increase in net sales to $838.7 million from $778.5 million in the prior year. HSN’s net sales increased 12% to $611.8 million, the highest quarterly sales volume in its 32-year history – “with sales growth over all product divisions,” Grossman said. Cornerstone’s net sales decreased 2% to $226.9 million, “a notable improvement compared to the year-to-date decline in net sales of 19% through the end of the third quarter,” the company noted.
Also for the quarter, the company reported an improvement in gross profit margin of 180 basis points, a reduction in operating expenses, and a 78% increase in EBITDA to $88.0 million from $49.3 million in the prior year.
The company’s new customer proportion increased by 14% and average spend per customer increased across all buying segments.
For the full year, sales were down 3% to $2.75 billion from $2.82 billion in 2008. By segment, net sales for the year for HSN increased 3% to $2.01 billion and Cornerstone declined by 14% to $741.7 million.
Full year 2009 net income of $72.5 million, or $1.26 per share, was in marked contrast to the year-ago net loss of $2.39 billion, or $42.54 per share.
“We now generate over $1 billion in sales from e-commerce on an annual basis,” Grossman noted. “Our goal is to evolve the business from what was catalog-centric to an e-commerce-focused organization. Internet sales grew year on year and now represent more than 58% of Cornerstone’s total net sales up from 55% in the prior year.”
In the Garnet Hill division, added Grossman, the company is “particularly excited about our exclusive relationship with Lily Pulitzer Home and the growth of all of our proprietary businesses.”