November 12, 2008, 12:00 AM

Q3 e-commerce sales post a modest gain at HSN

E-commerce was a moderate highlight in an otherwise flat third quarter for TV, catalog and web retailer HSN. Web sales grew by 4.8% and 7%, respectively, for Q3 and the first three quarters of the year.

Bill Briggs

Senior Editor

E-commerce was a moderate bright spot in an otherwise flat third quarter for TV, catalog and web retailer HSN Inc.

For the quarter ended Sept. 30, HSN reported web sales of about $235.3 million vs. web sales of $224.6 million in Q3 2007, an increase of 4.8%. In comparison, HSN, No. 25 in the Internet Retailer Top 500 Guide, reported flat overall sales. In the third quarter, HSN recorded net income of $2.2 million on total revenue of $672.3 million, compared with net income of $16.7 million on sales of $680.7 million in Q3 of 2007. Overall the web accounted for 35% of total net sales in the third quarter.

“Even in this challenging economy, HSN has recorded a sales increase in each quarter this year,” says HSN CEO Mindy Grossman. “Nevertheless, we are well aware that the business backdrop has changed dramatically. In response, we have moved quickly to maximize sales and profitability in the short-term without compromising our long-term business strategy. We are assessing changes in consumer demand on a daily basis and are taking advantage of the agility our model provides to keep our strategy on track.”

For the first three quarters of the year, HSN posted web sales of about $715.7 million, up by 7% from web sales of $669.2 million in the prior year. Overall in the first three quarters HSN recorded a net loss of $238.3 million on revenue of $2.04 billion, compared with net income of $108.3 million on sales of $2.03 billion during the previous year.

HSN, which spun out as a public company from former parent IAC/InterActive Corp. in August, continues to struggle with its Cornerstone web and catalog operation. In the third quarter, Cornerstone sales dropped year-over-year by 12% to $201.3 million from $228 million, while the brand’s gross profit decreased by 19% to $80.4 million from $99.1 million in Q3 of 2007.

“Cornerstone has presented more of a challenge. We are disappointed that the turnaround is progressing more slowly than we had hoped,” says Grossman. “However, this is due primarily to the overall macroeconomic environment. The home and apparel industries, which are Cornerstone’s primary businesses, have been particularly hard-hit by this economic downturn.”

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