Home Shopping Network 2015 Annual Report Download - page 22

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20
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this annual report. Historical results and trends which might appear should not be taken as indicative of
future operations. Our results of operations and financial condition, as reflected in the accompanying consolidated financial
statements and related notes, are subject to management’s evaluation and interpretations of business conditions, changing
market conditions and other factors.
Management Overview
HSNi offers innovative, differentiated retail experiences and markets and sells a wide range of third party and proprietary
merchandise directly to consumers through its two operating segments, HSN and Cornerstone. HSN's business platforms
include (i) the television home shopping programming broadcast on the HSN television networks; (ii) the HSN.com and
joymangano.com websites; (iii) mobile applications; (iv) outlet stores; (v) direct-response television marketing; and (vi)
wholesale distribution of certain proprietary products to other retailers. Cornerstone's business platforms include (i) catalogs,
consisting primarily of the Cornerstone portfolio of leading print catalogs which includes Ballard Designs, Chasing Fireflies,
Frontgate, Garnet Hill, Grandin Road, Improvements and TravelSmith; (ii) websites, consisting primarily of the seven branded
websites operated by Cornerstone; (iii) retail and outlet stores; and (iv) mobile devices.
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; HSN2, a network that primarily distributes taped programming; the HSN.com and joymangano.com
websites; mobile handheld devices; outlet stores; direct-response television marketing; and wholesale distribution of certain
proprietary products to other retailers. 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, digital sites and retail and
outlet stores. Cornerstone consists of the brands of Ballard Designs, Chasing Fireflies, Frontgate, Garnet Hill, Grandin Road,
Improvements and TravelSmith. Cornerstone is critically assessing its brand portfolio which could result in the divestiture of
underperforming, less strategic brands.
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 & health (beauty, wellness and fitness), and home & other (including
home, electronics, culinary 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 to its viewership and
maximizing airtime and internet efficiency. Cornerstone merchandise categories generally consist of home and outdoor
furnishings 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.