Home Shopping Network 2015 Annual Report Download - page 23

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21
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 digital 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,
2015 Change 2014 Change 2013
(Dollars in thousands)
HSN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,542,107 3% $ 2,476,088 7% $ 2,312,382
Cornerstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148,468 3% 1,111,907 2% 1,091,601
Total HSNi net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,690,575 3% $ 3,587,995 5% $ 3,403,983
HSNi net sales in 2015 increased 3%, or $102.6 million, due to 3% sales growth at HSN and 3% sales growth at
Cornerstone. Digital sales grew 7% with penetration increasing 200 basis points to 50.0%, up from 48.0% in the prior year. The
number of units shipped in 2015 increased 1% to 64.3 million and the average price point increased 1% to $64.03.
HSNi net sales in 2014 increased 5%, or $184.0 million, due to 7% sales growth at HSN and 2% sales growth at
Cornerstone. Digital sales grew 9% with penetration increasing 150 basis points to 48.0%, up from 46.5% in the prior year. The
number of units shipped in 2014 increased 4% to 63.6 million and the average price point increased 1% to $63.24.
HSN
HSN net sales in 2015 increased 3%, or $66.0 million. Sales grew in Home & Other and Fashion, offset by lower
sales in Jewelry. Within Home & Other, sales increased in electronics, partially offset by lower sales in home. Strength in
electronics was driven by partnerships with key brands while jewelry sales continued to be pressured this year as we
repositioned this business. Digital sales grew 8% with penetration increasing 200 basis points to 41.4%. The return rate
decreased 60 basis points to 17.1% from 17.7% in the prior year primarily due to a shift from merchandise with historically
higher return rates, such as jewelry, to merchandise with lower return rates, such as electronics. Units shipped in 2015
increased 3% to 49.8 million. The average price point decreased 1% to $58.61. Sales from HSN's wholesale business
increased in 2015 driven by an expanded product assortment sold to additional retail stores. Overall, the wholesale business
represented 1% of HSN's net sales.
HSN net sales in 2014 increased 7%, or $163.7 million. Sales grew in all divisions except Jewelry with significant
growth in the home category. Digital sales grew 14% with penetration increasing 240 basis points to 39.4%. The return rate
decreased 110 basis points to 17.7% from 18.8% in the prior year primarily due to a shift from merchandise with historically
higher return rates, such as jewelry, to merchandise with lower return rates, such as home. Units shipped in 2014 increased 5%
to 48.4 million. The average price point increased 2% to $59.10 primarily due to a decrease in clearance sales.
During 2014, we recognized $5.0 million of revenue related to unused customer credits where we determined it was
not probable we have an obligation to escheat the value of the credits under unclaimed property laws and the likelihood of
redemption was considered remote (“breakage”). This was the first year in which we were able to estimate and recognize
customer credit breakage and, therefore, it included the breakage revenue related to customer credits issued since inception of
this program. While we expect to continue to recognize customer credit breakage in future periods, the amounts will be
significantly less than in 2014 due to the one-time multi-year inclusion in 2014.