Home Shopping Network 2012 Annual Report Download - page 24

Table of Contents
Results of Operations
Net Sales
Net sales primarily relate to the sale of merchandise, including shipping and handling fees, and are reduced by incentive discounts and
actual and estimated sales returns. Revenue is recorded when delivery to the customer has occurred. Delivery is considered to have occurred
when the customer takes title and assumes the risks and rewards of ownership, which is generally on the date of shipment. HSNi’s sales policy
allows customers to return virtually all merchandise for a full refund or exchange, subject to pre-established time restrictions.
HSNi net sales in 2012 increased 6%, or $197.4 million, due to 5% sales growth at HSN and 10% sales growth at Cornerstone. Digital
sales grew 13% with penetration increasing 270 basis points to 44.5%, up from 41.8% in the prior year. The number of units shipped in 2012
increased 8% to 59.6 million and the average price point decreased 2% to $62.92.
HSNi net sales in 2011 increased 6%, or $185.0 million, due to 2% sales growth at HSN and 18% sales growth at Cornerstone. Digital
sales grew 14% with penetration increasing 280 basis points to 41.8%, up from 39.0% in the prior year. The number of units shipped in 2011
increased 5% to 55.0 million and the average price point increased 3% to $64.47.
HSN
HSN net sales increased 5% in 2012, or $104.7 million, driven by sales growth in home design, household, beauty and culinary, offset by
lower sales in jewelry. During 2012, HSN focused on several key initiatives targeted at customer acquisition and retention. Pricing strategies
and product selection were designed to appeal to potential and current customers with lower overall price points and product selection to drive
higher volumes; we offered entertainment events designed to reinforce our brand and company awareness in the marketplace; we continued to
invest in digital marketing initiatives to appeal to the growing number of digital consumers; and we provided our customers with payment
alternatives designed to make the shopping experience with HSN easier and flexible. As a result of these and other initiatives, the number of
units shipped increased 8% to 44.7 million and average price point decreased 4% to $60.57. Digital sales grew 10% with penetration increasing
160 basis points to 35.4%, up from 33.8% in the prior year. Shipping and handling revenues decreased 4% driven by an increase in shipping and
handling promotions, particularly in the second half of the year. The return rate decreased 50 basis points to 19.5% from 20.0% in the prior year.
HSN net sales increased 2% in 2011, or $44.4 million, driven by revenue growth in the home & other division, particularly in the
electronics and culinary categories. Digital sales grew 9% in 2011 with penetration increasing 200 basis points to 33.8%, up from 31.8% in the
prior year. Average price point increased 3% and units shipped increased 2%. The return rate increased to 20.0% from 18.9% primarily due to
changes in product mix.
Divisional product mix at HSN is provided in the table below:
20
Year Ended December 31,
2012 Change 2011 Change 2010
(Dollars in thousands)
HSN
$
2,265,026
5%
$
2,160,341
2%
$
2,115,918
Cornerstone
1,001,713
10%
909,015
18%
768,390
Total HSNi net sales
$
3,266,739
6%
$
3,069,356
6%
$
2,884,308
Year Ended December 31,
2012 2011 2010
Jewelry
12.9
%
14.0
%
14.6
%
Fashion (apparel & accessories)
13.0
%
13.3
%
13.5
%
Beauty & Wellness
17.6
%
17.3
%
17.3
%
Home & Other (including household, home design, electronics, culinary, fitness and other)
56.5
%
55.4
%
54.6
%
Total
100.0
%
100.0
%
100.0
%