Home Shopping Network 2013 Annual Report Download - page 22

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20
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. Sales taxes collected are not included in net sales. Digital sales
include sales placed through our internet websites and our mobile applications, including tablets and smart phones.
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 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.
Year Ended December 31,
2013 Change 2012 Change 2011
(Dollars in thousands)
HSN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,312,382 2% $ 2,265,026 5% $ 2,160,341
Cornerstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,091,601 9% 1,001,713 10% 909,015
Total HSNi net sales . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,403,983 4% $ 3,266,739 6% $ 3,069,356
HSNi net sales in 2013 increased 4%, or $137.2 million, due to 2% sales growth at HSN and 9% sales growth at
Cornerstone. Digital sales grew 9% with penetration increasing 200 basis points to 46.5%, up from 44.5% in the prior year.
The number of units shipped in 2013 increased 4% to 62.0 million and the average price point decreased 1% to $62.37.
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.
HSN
HSN net sales in 2013 increased 2%, or $47.4 million. Sales grew in beauty & health, home design and household,
offset by lower sales in jewelry, culinary and electronics. HSN repositioned the jewelry and culinary businesses in 2013
through changes in product and brand assortment and, as a result, dedicated lower airtime to these product categories. Digital
sales grew 7% and penetration increased 160 basis points to 37.0%, up from 35.4% in the prior year. Digital sales were
tempered in the first quarter by the launch of the digital site redesign across all HSN digital platforms while HSN implemented
its new technology and our customers acclimated themselves with the new website design and capabilities. The return rate
decreased 80 basis points to 18.7% from 19.5% in the prior year primarily due to the shift in product mix to categories with
lower return rates as well as experiencing lower than historical return rates in many of its product categories. The gross units
shipped increased 5% to 46.9 million while average price point decreased 4% to $58.21 primarily due to an increase in
clearance activity and changes in product mix.
HSN net sales in 2012 increased 5%, 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.