QVC Unlikely To Buy HSN Anytime Soon, If Ever

HSN, Inc. HSNI has delivered “slowing to negative growth” both at its HSN video commerce segment and at Cornerstone. While trends at the HSN segment may improve in the coming quarters, “we are less optimistic about the recovery path for Cornerstone,” Aegis Capital’s Victor Anthony said in a report.

Anthony initiates coverage of the company with a Hold rating and a price target of $41. HSN’s sales turned negative in fourth-quarter 2015 due to a tough retail environment and underperformance at several categories. The company is undertaking several initiatives to return to growth.

HSN Trends To Improve, Cornerstone To Remain Challenging

HSN’s merchandising, programming and customer growth initiatives “stand a great chance at succeeding,” and the HSN segment may return to growth in the second half of 2017, Anthony mentioned.

The analyst expressed concern, however, regarding Cornerstone’s path to recovery, saying that whenever revenue growth resumes, it would likely be “anemic.” The company may pursue strategic alternatives with this business.

Gross margins at both the segments would likely remain under pressure “for the foreseeable future,” Anthony added.

HSN As An Acquisition Target

Liberty, which has a 38 percent stake, could be considered as “a logical acquirer.” However, the analyst quoted the company as saying, “[O]ur views on HSN, we own 38 percent of it, we like it [...] We trade at a substantial discount to them. And when we look at the relative attractiveness of share repurchase of our own stock versus doing something more broadly, our own stock has looked more attractive.”

QVC currently views its own stock as more attractive than purchasing HSN. “Hence, our view is that QVC is unlikely to acquire HSN anytime soon, if ever,” Anthony commented.

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