The recession hit HSN Inc. full force, stalling the e-commerce company's turnaround.
The St. Petersburg parent of the nation's second-biggest TV shopping channel reported an 11 percent drop in sales for the quarter that included the Christmas holidays and a $2.9 billion loss as it wrote off goodwill carried on its books since going public last summer.
HSN's sales performance for the quarter that ended Dec. 31 was dragged down by a 25 percent sales collapse at its Cornerstone collection of mail order catalogs. Sales at the TV shopping network were down 4 percent, a bit worse than the rest of the broad, depressed general merchandise retail industry, but better than department stores. The company's dot-com business was up 4 percent, which is better than the online retail industry did during the holidays, and had grown to 28 percent of the company.
HSN shares have been all over the board since the IAC/InterActiveCorp set it off at $10 a share just before the fall stock market meltdown. Shares have traded as low as $1.61 and as high as $15, but after the writedown Tuesday were trading at $3.79, down 6 cents.
Despite the huge paper loss, HSN ended the quarter with $177 million in cash, remained in compliance with its debt restrictions and expressed confidence it can manage its way through the recession.
"We continue to believe that our unique business model at HSN and the changes that we are implementing at Cornerstone will enable us to weather the storm and in fact allow us to gain (market) share" from TV shopping rivals that all reported worse results for the holidays, said Mindy Grossman, HSN chief executive.
The company's market capitalization — what the stock market thought the company was worth — before Tuesday's earnings release was a scant $220 million, less than a tenth of what the network's book value was at the time it was spun off on its own last August.
In today's volatile stock market, many companies are facing similar massive writedowns to square their books with market reality.
Officials said the noncash writedown will not make it an easier target for acquisition by the likes of rival Liberty Media, which owns all of QVC and 30 percent of HSN, to buy the rest of the No. 2 TV shopping network. Liberty executives recently said they figured they would buy controlling interest in HSN "eventually." In HSN's breakaway agreement from IAC, Liberty agreed not to bid for controlling interest in HSN until at least May 2010.
For the full year, HSN reported losing $3.1 billion, vs. a net income of $170 million in 2007. Sales slipped 3 percent to $2.8 billion, down from $2.9 billion.
The company recently cut payroll by 250 jobs, reduced 401(k) matching contributions and froze pay. Cornerstone's management also has been overhauled.
HSN also announced hiring Brian Bradley, who previously headed the dot-com, call center and catalog operation at Circuit City Stores Inc., as executive vice president of HSN.com and Advanced Services.
Mark Albright can be reached at email@example.com or (727) 893-8252.