Barry Diller's USA Interactive Inc. on Wednesday reported $106-million in charges against second-quarter earnings, reflecting the collapse of Home Shopping Network's foreign-language ventures.
Meanwhile, sales growth continued to slow at HSN's domestic TV shopping channels. The slowdown was expected because the St. Petersburg network is pushing sales of higher-profit items. Still, sales are running below the company's plan for July.
"We don't know if it's a trend yet, but it's tough out there," Diller said. "As far as the (overseas ventures and the Spanish-language Home Shopping Espanol) we just expanded them too fast."
The company also disclosed that it was "discussing" with the Securities and Exchange Commission how it accounts for sales. At issue is the company using two different ways of accounting for revenues at its Expedia Inc. and Hotels.com subsidiaries.
USA acquired controlling interest in Hotels.com in 1999 and Expedia in 2002. Both companies continue to be traded as separate stocks. Diller said he asked the SEC for clarification. He has proposed buying the remaining outstanding shares of both companies and consolidating their financial reporting.
The company's financial results reflected difficulties in foreign expansion of HSN. Diller had ambitiously expanded HSN into seven more countries in the past year. However, the financial collapse of HSN's partner in Europe, German cable TV giant Kirch Media, shut down all the European ventures except Italy, Austria and Germany. Diller also unplugged the HSN Spanish-language shows, which were aired in the United States and Mexico. There has been no change in HSN TV shopping ventures in Japan and China.
Diller has not given up entirely on the company's $175-million investment in the failed expansion. He restructured HSN International and hired a new management team. He said three European broadcasters are bidding to take over as HSN partners in reviving the European TV shopping channels that had been based in London and Brussels.
Overall, USA Interactive reported that its earnings surged thanks largely to a $2.4-billion gain from selling its entertainment assets to Vivendi Universal SA. Net income for the quarter that ended June 30 rose to $2.3-billion, or $4.87 a share, from $39.6-million, or 9 cents a share, a year earlier. Sales rose 19 percent to $1.12-billion from $940-million.
HSN revenues domestically grew a modest 6 percent to $376-million in the quarter, about half the pace of sales growth seen in recent years. The average customer purchase slipped $3.18 to $44.18 as the company continued shifting its product mix away from computer-related products to the higher profit margins of apparel and health/beauty products. HSN's profit margin increased 4 percentage points to 38 percent.
HSN plans to get more aggressive promoting two new product lines that debut this fall. One is a lingerie line that will be promoted by former Victoria's Secret model Stephanie Seymour. The other is an apparel and jewelry line that will be promoted by Kathy Levine, who was once rival QVC's top show host.
_ Mark Albright can be reached at albrightsptimes.com or (727) 893-8252.