HSNi's Cornerstone Brands segment makes 'turnaround' in Q2

Posts double-digit net sales increases

Cecile Corral -- Home Textiles Today, 8/17/2010 3:52:20 PM

St. Petersburg, Fla. - HSNi's catalog and ecommerce segment, Cornerstone Brands, achieved an accelerated recovery during the second quarter, with double-digit net sales increases and a jump in internet sales penetration.

Judy Schmeling, evp and cfo, said during the company's quarterly call today that it "couldn't be more excited about the continued turnaround at Cornerstone," where net sales increased 20% to $223.6 million compared to the prior year, and internet sales penetration increased 140 basis points to now represent 55.4% of Cornerstone's net sales.

The growth spurt was "driven by the outstanding performance of our three largest brands - Frontgate, Ballard Designs and Garnet Hill," said Schmeling.

Cornerstone's total product mix comprises home - 65% -- and apparel - 35%.

Schmeling outlined more specific factors that drove the gains, such as: a recovery in the outdoor furniture business at Frontgate "as well as the continued success of our Frontgate positioning; successful new partnerships and product introductions at Ballard Designs; sustained sales demand for Garnet Hill; less promotional sales required to stimulate demand; and strong customer growth with record productivity levels in re-activation contacts that are more targeted to catalog circulation and email communication.

Mindy Grossman, ceo and director, added that in the home category, the recently launched Lily Pullitzer collection "contributed to Garnet Hill's growth in the quarter."

"Last year, [segment] sales were down 21%, in a large part due to the macro-economic environment," Schmeling said. "But with the strategies we put in place to make improvements as well as the resurgence in demand resulted in the business having its best growth rate on a comp basis since 2005."

Cornerstone's gross profit increased 22% to $96.5 million and gross profit margin improved 50 basis points to 43.1% from 42.6% in the prior year. The margin improvement was attributable to reduced promotional activity and leverage over warehousing costs, the company said.

Total company net income nearly doubled to $24.7 million, or 42 cents per share, from $13.6 million, or 24 cents per share, in the year-ago period.

HSNi sales increased 8% to $690 million from $640.1 million, with internet sales up 16%. The gross profit margin improved 130 basis points to 37.5%.

Results for the HSN segment included a sales increase of 3% to $466.4 million and a gross profit increase of 6% to $162.2 million.