Change slows HSN sales growth
With the distraction of a new acquisition complete, the company delivers "moderate" sales and an optimistic outlook.
By MARK ALBRIGHT
Published February 9, 2006
Sales growth moderated at HSN Inc. during the fourth quarter as management's attention was diverted by fitting mail-order catalog operator Cornerstone Brands into the St. Petersburg TV shopping and online retailer.
"HSN's sale momentum slowed," said Barry Diller, chairman and chief executive of HSN parent IAC/InterActiveCorp, which on Wednesday released its earnings for the quarter that included the Christmas holiday season. "We had gaps in merchandising and execution. Integrating Cornerstone into HSN became a distraction."
HSN reported a 49 percent sales gain to $941-million and operating income soared 57 percent to $95-million. But most of the impressive increases came from Cornerstone, the Cleveland, Ohio, mail-order house acquired last year, appearing on the books. The company didn't break out HSN's sales performance beyond terming the sales gain as "moderate." One analyst during a company conference call Wednesday called it "anemic."
Diller said he expects the pace to perk up once HSN hires a chief merchant, a position that has been vacant since last spring, and more Cornerstone products - mostly home improvement, travel and apparel lines - get air time on the TV network and exposure online.
Diller briefly outlined his latest refined vision of HSN. Previously, he saw the company shifting more of its sales from TV shopping channels to hsn.com, which accounts for about 18 percent of sales. Now he sees the company evolving into more of a multichannel retailer that has added catalogs to its armory.
During its first holiday season under HSN, Cornerstone more than quintupled distribution of its catalogs - which go by such names as Ballard Design, Frontgate and Garnet Hill - to more than 100-million. Diller also expects to expand the technology developed by recently acquired Shoebuy.com to other categories of merchandise sold by HSN and its Web sites.
Boston-based Shoebuy operates a Web site that supposedly makes it easier to shop from an unwieldy inventory of more than 400,000 leather products from 250 manufacturers.
"We want to be able to sell you anything, anywhere, any time you want it," Diller said.
IAC, meanwhile, is gearing up to unveil Diller's next big experiment with the relaunch of Ask Jeeves as Ask.com on Feb. 27. Dwarfed by rivals Yahoo and Google, Ask Jeeves controls about 6 percent of the search market. The new look is more than nudging the familiar Ask Jeeves butler off the logo. The retooled site will offer new services on a redesigned desktop. Diller also learned that by shrinking the list of sponsored links generated for each search from 10 to 3, Ask Jeeves draws more traffic and earns more advertising money.
For the quarter, IAC reported that net income rose to $113-million, or 33 cents a share, up from a loss of $46-million, or 13 cents a share. Revenues grew 45 percent to $1.8-billion, up from $1.2-billion. The comparisons are not very meaningful, however, because the year-ago numbers are from operating units that were once part of a larger IAC. Diller broke his empire into separate companies with separate stocks last year.
Diller said his recent naming of Michael Jackson as IAC's president and chief operating officer does not signal any interest in steering the company back to the movies or entertainment business. Jackson, the former head of Universal Television Group, spent the past five years running Channel 4, a British TV network.
Mark Albright can be reached at albright@sptimes.com or 727 893-8252.