Home Shopping Network 2010 Annual Report Download - page 24

Table of Contents
Management Overview
HSNi markets and sells a wide range of third party and proprietary label merchandise directly to consumers through (i) television home
shopping programming broadcast on the HSN television networks; (ii) catalogs, which consist primarily of the Cornerstone portfolio of leading
print catalogs which includes Frontgate, Ballard Designs, Garnet Hill, Smith+Noble, The Territory Ahead, TravelSmith and Improvements;
(iii) websites, which consist primarily of HSN.com and the seven branded websites operated by Cornerstone; (iv) retail and outlet stores; and
(v) mobile handheld devices. HSNi’s television home shopping business, related internet commerce and outlet operations are referred to herein
as “HSN” and all catalog operations, including related internet commerce and retail and outlet stores, are collectively referred to herein as
“Cornerstone.”
Sources of Revenue
HSN revenue includes merchandise sales originating from the live television broadcasts of its programming 24 hours per day, seven days a
week, the HSN.com website and through mobile handheld devices. HSN also sells merchandise through its “Autoship” program under which
customers receive scheduled merchandise shipments according to a pre-determined calendar.
Cornerstone sells private label and third party merchandise through its assortment of catalogs, internet sites and retail and outlet stores.
Cornerstone consists of the brands of Frontgate, Ballard Designs, Garnet Hill, Smith+Noble, The Territory Ahead, TravelSmith and
Improvements.
Products
HSNi sells a wide array of merchandise across its various channels of distribution. HSN merchandise categories primarily consist of
jewelry, fashion (apparel & accessories), beauty & wellness, and home & other (including housewares, home fashions, electronics, fitness and
other). HSN manages its product mix to provide a balance between satisfying existing customer demand, generating interest from potential
viewers and customers, providing new merchandise or values to its viewership and maximizing airtime and internet efficiency. Cornerstone
merchandise categories generally consist of home furnishings (including indoor/outdoor furniture, window treatments and other home-related
goods) and apparel & accessories.
HSNi management believes that merchandise diversification, combined with an interactive multi-
channel distribution strategy, appeals to a
broader segment of potential customers and is an important part of its overall business strategy. HSNi is continually developing new
merchandise offerings from existing, potential and future suppliers, to supplement its existing product lines.
Discontinued Operations
HSNi’s international subsidiaries that previously conducted business in the United Kingdom (which was dissolved in September 2009),
Belgium and Mexico are presented as discontinued operations in these consolidated financial statements.
Economic and Other Trends
During 2010, the retail industry showed signs of recovery from the recessionary environment experienced during previous years. HSNi’s
revenue grew 9% which included 5% growth at HSN and 19% growth at Cornerstone. HSN had revenue growth in the electronics, fashion and
wellness categories. Cornerstone’s revenue growth was led by its effective execution of strategic merchandising and marketing initiatives
implemented earlier in the year; an increase in demand for luxury and home furnishing products; and investment in circulation at its three largest
brands, Frontgate, Ballard Designs and Garnet Hill. We expect continued challenges within the economic environment, including rates of
unemployment, consumer confidence, fuel and product costs, and other economic factors affecting consumer spending behavior, could
negatively influence our top-line and/or gross profit growth in 2011.
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