Home Shopping Network 2015 Annual Report Download - page 24

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22
Divisional product sales mix at HSN is provided in the table below:
Year Ended December 31,
2015 2014 2013
Jewelry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5% 9.6% 11.6%
Fashion (apparel & accessories) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.6% 14.0% 14.1%
Beauty & Health (including beauty, wellness and fitness) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.3% 27.6% 28.6%
Home & Other (including home, electronics, culinary and other) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49.6% 48.8% 45.7%
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
Cornerstone
Cornerstone net sales in 2015 increased 3%, or $36.6 million. The increase in net sales was due to sales growth in the
home brands and Garnet Hill, partially offset by lower sales in Chasing Fireflies and TravelSmith. Digital sales grew 6% with
penetration increasing 200 basis points to 69.0%. The return rate was 13.1%, consistent with the prior year. Catalog circulation
increased 2% to 330.6 million compared to the prior year.
Cornerstone net sales in 2014 increased 2%, or $20.3 million. The increase in net sales was driven primarily by sales
growth in the home brands, partially offset by lower sales in the apparel brands, particularly Garnet Hill. Digital sales grew 3%
with penetration increasing 60 basis points to 67.0%. The return rate increased 20 basis points to 13.1%. Catalog circulation
increased 2% to 325.1 million compared to the prior year.
The brand mix at Cornerstone is provided in the table below:
Year Ended December 31,
2015 2014 2013
Home brands (Ballard Designs, Frontgate, Grandin Road and Improvements) . . . . . . . . . . . . . . . . . . . . . 78.3% 76.5% 73.9%
Apparel brands (Chasing Fireflies, Garnet Hill and TravelSmith). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.7% 23.5% 26.1%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
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,
2015 Change 2014 Change 2013
(Dollars in thousands)
Gross profit:
HSN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 873,507 3% $ 852,046 7% $ 796,705
As a percentage of HSN net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.4% - 34.4% (10 bp) 34.5%
Cornerstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 441,056 5% $ 421,016 (3)% $ 433,110
As a percentage of Cornerstone net sales. . . . . . . . . . . . . . . . . . . . . . 38.4% 50 bp 37.9% (180 bp) 39.7%
HSNi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,314,563 3% $ 1,273,062 4% $ 1,229,815
As a percentage of HSNi net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.6% 10 bp 35.5% (60 bp) 36.1%
bp = basis points
HSN
Gross profit for HSN in 2015 increased 3% or $21.5 million, while gross profit as a percentage of net sales was
34.4%, consistent with the prior year. There was an increase in net shipping expense driven by higher shipping promotions that
was offset by higher product margins, both of which were impacted by product mix.