Home Shopping Network 2011 Annual Report Download - page 25

HSN net sales increased 5% in 2010, or $108.0 million, driven by revenue growth in the Home & Other
division, particularly in the electronics category, as well as the Fashion division. Digital sales grew 11% with
penetration increasing 150 basis points to 31.8%. 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 2% to $61.00 from $59.81.
Divisional product mix at HSN is provided in the table below:
Year Ended December 31,
2011 2010 2009
Jewelry ................................................................. 14.0% 14.6% 15.5%
Fashion (apparel & accessories) .............................................. 13.2% 13.6% 11.3%
Beauty & Wellness ........................................................ 17.2% 17.3% 17.7%
Home & Other (including housewares, home fashions, electronics, culinary, fitness and other) . . . 55.6% 54.5% 55.5%
Total ................................................................... 100.0% 100.0% 100.0%
Cornerstone
Cornerstone’s net sales for 2011 increased 15%, or $136.0 million, compared to the prior year. The sales
growth is primarily attributable to strength at Cornerstone’s three largest brands, Frontgate, Ballard Designs and
Garnet Hill; as well as investment in catalog circulation and digital marketing. Digital sales grew 20% with
penetration increasing 220 basis points to 59.2%. The average price point and the number of units shipped
increased 4% and 10%, respectively. Catalog circulation increased 12% compared to the prior year.
Cornerstone’s net sales for 2010 increased 19%, or $139.2 million, compared to 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. Catalog circulation increased 11% compared to the prior
year.
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 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.
Year Ended December 31,
2011 Change 2010 Change 2009
(Dollars in thousands)
Gross profit:
HSN ................................... $ 741,308 5% $ 709,181 4% $678,717
HSN gross profit margin ................... 34.3% 80 bp 33.5% (30 bp) 33.8%
Cornerstone ............................. $ 408,746 16% $ 351,833 16% $302,597
Cornerstone gross profit margin ............. 40.2% 30 bp 39.9% (90 bp) 40.8%
HSNi ................................... $1,150,054 8% $1,061,014 8% $981,314
HSNi gross profit margin ................... 36.2% 80 bp 35.4% (30 bp) 35.7%
bp = basis points
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