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HSN Rings Up Improved Sales

2/28/2011 12:01 AM Eastern

A strong showing in consumer electronics
helped push revenue at HSN Inc. northward in the fourth
quarter, as traditional categories like fashion and wellness
continued their momentum.

Total revenue at HSN was up 9%, to $915.2 million in the
quarter, fueled by a 23% increase at its Cornerstone Brands
catalog unit and 4% growth at the shopping network. For
the full year, total sales increased 9% to $3 billion.

HSN said the revenue growth was due mainly to strong
sales in consumer electronics, fashion and wellness categories.
In October, HSN launched Microsoft’s Xbox 360
Kinect system (which allows users to play video games
without a handheld controller) and sold out in 15 minutes.
The systems were made available to the general public in
November. JVC also launched new camcorder technology
first on HSN in December, a full month before it was
unveiled at the International Consumer Electronics Show
in January. The channel also sold 170,000 digital imaging
scanners in the period.

Cash flow also increased at a healthy pace during the
quarter — at $93.3 million, it was up 6% in Q4.

Operating income declined 1% to $64.2 million at HSN
in the period, but was up 3% overall due to a 36% gain at
Cornerstone.

FASHIONABLY STRONG

While HSN has sold consumer electronics in the past,
the channel has been better known for its fashion and
apparel products. Th ose categories also showed some added
strength in the quarter, fueled by the launch of fashion
designer Donna Karan’s DKNYC line, and footwear and
apparel from pop star Mariah Carey. In the beauty category
— another perennial HSN strength — a new hair
care line from Oprah Winfrey’s personal hair stylist Andre
Walker sold 10,000 units in its first hour.

On a conference call with analysts, HSN CEO Mindy
Grossman said the focus during the fourth quarter was on
creating “appointments to view,” primarily event-type programming,
which began in the third quarter with a Rod
Stewart concert that ultimately led to the sale of 30,000
CDs. Grossman said that continued with the launch of a
Mariah Carey holiday CD on the channel and a partnership
with Paramount studios, in which HSN integrated
clips from the studio’s movie Morning Glory into its morning
shows.

COLLABORATIONS WORK

“These marketing collaborations will continue into 2011,
given the positive response from our customers to entertainment
programming, as well as our ability to generate
new marketing revenue,” Grossman said, adding that HSN
partnered with Paramount again, integrating clips from
Never Say Never, the recently released Justin Bieber film.

HSN also is moving forward on its Shop by Remote technology,
which is now available in more than 30 million
homes. Chief financial officer Judy Schmeling said on the
call that the rollout will continue in 2011.

Schmeling added that HSN2, which airs encore showings
of select HSN programming and was launched on
Dish Network last year, is still in test mode, adding that the
company is evaluating whether to expand its distribution.

“We can go out and get additional distribution today if
we wanted to, but we’re trying to manage what is the cost
of that distribution relative to the sales it generates and
making sure we’re not outpacing it,” Schmeling said. “It’s
still very early stages.”

September