HSN Inc.’s sales and income fell in the second quarter as the company decided to sell its TravelSmith and Chasing Fireflies businesses. HSN also appointed Judy Schmeling president of Cornerstone. The stock is falling over 6 percent to $48.41 in early trading.
HSN’s net income dropped 36 percent to $26.4 million, or 50 cents share, from last year’s $41.6 million. Adjusted net income fell 10 percent to $39.3 million from last year’s $43.5 million. Adjusted earnings per share were 74 cents, which beat the FactSet estimate for earnings of 71 cents a share.
HSNi’s net sales fell 4 percent to $854.3 million and missed the FactSet estimate for sales of $871 million. HSN’s net sales fell 3 percent to $557.2 million and Cornerstone’s net sales dropped 5 percent to $297.1 million.
“HSNi’s results were impacted by the performance of certain merchandising categories at HSN as well as a weaker season and a greater promotional environment in the outdoor business at Cornerstone,” stated Mindy Grossman, chief executive officer of HSN Inc. Sales grew in electronics and beauty, but the company saw decreases in other categories and in shipping revenues.
Grossman said the company is now focused on the brands that have the greatest potential, which includes Cornerstone. She moved Schmeling to drive the business at Cornerstone as president. Schmeling will also continue as chief operating officer and chief financial officer at HSN until a successor can be appointed.
As part of the brand focus, HSN is selling TravelSmith and Chasing Fireflies. HSN recorded a non-cash impairment charge of $20.4 million related to these assets. The company has entered into a letter of intent to sell the two brands, but did not disclose the amount of the sale or the buyer.
Gross profits dropped by 6 percent to $197.1 million due to an increase in shipping promotions, higher inventory reserves and changes in the product mix. The average price point fell 2 percent in the quarter and the number of units shipped declined 2 percent as well. On a positive note, HSNi’s digital sales increased by 2 percent, bringing digital sales penetration up to 53 percent.
HSN’s stock has fallen 33 percent for the past year as the company adjusts to a consumer who is shopping less on television and more online.