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Table of Contents
in the prior year. The growth in net sales is attributable to increased consumer demand as reflected by the 5% increase in units shipped to
40.6 million from 38.8 million. Average price point increased 1% to $59.34 from $58.63.
HSN net sales increased 3% to $2.0 billion in 2009 as compared to the prior year. HSN.com net sales grew 9% and represented 30.3% of
HSN’s net sales. The product mix in 2009 shifted towards the electronics and fitness divisions. The growth in net sales is attributable to the 5%
increase in units shipped to 38.8 million from 36.9 million, offset by the 2% decrease in average price point to $58.63 from $60.13. The decrease
in the average price point is primarily a result of changes in merchandise offerings, sales of key items at lower price points and product mix.
Divisional product mix at HSN is provided in the table below:
Cornerstone
Cornerstone’s net sales for 2010 increased 19% to $880.9 million from the prior year. The increase was primarily due to effective
execution of strategic merchandising and marketing initiatives; our investment in catalog circulation primarily in Cornerstone’s three largest
brands, Frontgate, Ballard Designs and Garnet Hill; and a resurgence in consumer demand for luxury and outdoor products. The average price
point and the number of units shipped increased 1% and 16%, respectively.
Cornerstone’s net sales for 2009 decreased 14% to $741.7 million from the prior year. The decrease was primarily the result of softness in
consumer demand, particularly in the first half of the year, for luxury and outdoor products. The decrease is also attributable to the 24% strategic
reduction in catalog circulation compared to the prior year. The average price point and the number of units shipped decreased less than 1% and
15%, respectively.
Cost of Sales and Gross Profit
Cost of sales consists primarily of the cost of products sold, shipping and handling costs and compensation and other employee-related
costs (including stock-based compensation) for personnel engaged in warehouse functions. Cost of products sold includes merchandise cost,
inbound freight and duties and certain allocable general and administrative costs, including certain warehouse costs.
bp = basis points
23
Year Ended December 31,
2010
2009
2008
Jewelry
14.6
%
15.5
%
16.3
%
Fashion (apparel & accessories)
13.6
%
11.3
%
12.6
%
Beauty & wellness
17.2
%
17.7
%
18.3
%
Home & other (including housewares, home fashions, electronics, fitness and other)
54.6
%
55.5
%
52.8
%
Total
100.0
%
100.0
%
100.0
%
Year Ended December 31,
2010
Change
2009
Change
2008
(Dollars in thousands)
Gross profit:
HSN
$
709,181
4%
$
678,717
7%
$
633,186
HSN gross profit margin
33.5
%
(29 bp)
33.8
%
145 bp
32.4
%
Cornerstone
$
351,833
16%
$
302,597
(14%)
$
352,244
Cornerstone gross profit margin
39.9
%
(86 bp)
40.8
%
16 bp
40.6
%
HSNi
$
1,061,014
8%
$
981,314
(0%)
$
985,430
HSNi gross profit margin
35.4
%
(28 bp)
35.7
%
79 bp
34.9
%