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HSN faces challenges to sustaining its healthy sales growth

After reporting continued healthy sales growth through the summer, HSN executives on Wednesday said they face a challenge keeping up the pace through the holiday season.

For starters, consumers remain frugal. Just as important, however, the TV shopping network must beat last year's holiday season, which was the best in its 33-year history.

"We're cautiously optimistic," CEO Mindy Grossman said. "And we're going after the business."

The network has planned several events and lined up celebs eager to launch their product lines. The latest are Kate Walsh of Gray's Anatomy and Private Practice and pop singer Mariah Carey. She launches her lifestyle brand of fragrance, music, jewelry and footwear Nov. 19. Also coming: new lines from DKNY, shoemaker Steve Madden, a 24-hour cookware-a-thon with the network's five celebrity chefs and a parade of up-and-coming designers in a promotion with style magazine Lucky.

Despite rapidly shrinking prices for consumer electronics, Grossman plans to dedicate plenty of TV time to HDTVs and video game products such as Kinect for the Xbox 360.

Meanwhile, Grossman said there was "nothing to report" on whether Liberty Media Interactive, HSN's largest shareholder — which already owns rival QVC outright — would increase its stake above its current 35 percent or whether HSN was working up an offer to buy back Liberty's shares.

The top executive at each network has questioned whether a merger would be beneficial. Two months ago, Liberty chairman John Malone said he planned to wrap up a decision by year's end on his interest in buying more or all of HSN.

Nonetheless, Wall Street reacted. HSN shares dropped 11 percent, or $3.20, to close at $26.55, about where the stock was trading in August.

For the quarter ended Sept. 30, the TV network reported that sales rose 6 percent. Sales increased 10 percent at HSN.com and 23 percent at its Cornerstone mail order catalog business.

Combining its operating units, HSN Inc. reported revenues were up 10 percent to $708 million. Net income declined 10 percent to $14.9 million, or 25 cents a share, from $16.6 million, or 31 cents a share, a year ago.

Earnings were dragged down by two one-time charges. One was a $2.5 million legal settlement of a patent infringement suit connected with HSN's electronic ordering system. The second was $2.4 million set aside for the voluntary recall of an unidentified product sold through one of the Cornerstone catalogs. The company won't identify the product until the settlement is approved by the U.S. Consumer Product Safety Commission.

Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

HSN faces challenges to sustaining its healthy sales growth 11/03/10 [Last modified: Thursday, November 4, 2010 5:41pm]
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