Ladies and gentlemen, good morning, and welcome to the HSN, Inc. First Quarter 2013 Earnings Conference Call and Webcast. This call is being recorded. Following the conclusion of today's discussion, the HSNi team will be taking your questions. With that, I'd now like to turn the call over to Felise Glantz Kissell, Vice President of Investor Relations. Ms. Kissell, please go ahead.

Hello, everyone, and thank you for joining us. On this morning's call, we have Mindy Grossman, Chief Executive Officer of HSNi; and Judy Schmeling, Chief Financial Officer. Judy will initially review our financial performance. Mindy will then strategically discuss the business. As always, some of the statements made on this call may be forward-looking and, as such, are subject to many factors that could cause actual results to differ materially from expectations reflected in the forward-looking statements. Additional information regarding these factors, as well as various risks and uncertainties, can be found in HSNi's earnings release filed with the U.S. Securities and Exchange Commission and available on the company's website. HSNi does not undertake to publicly update or revise any forward-looking statements. In addition, on today's call, there will be references to certain non-GAAP financial measures. These are described in more detail in the company's earnings release and SEC filings available on the HSNi website. You are encouraged to refer to the press release and the SEC filings and to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results. I would now like to turn the call over to Judy Schmeling, HSNi's CFO. Judy?

Thanks, Felise. Good morning, everyone, and thank you for joining us. We continue to remain highly focused on driving financial performance while we strategically position the business for long-term success. During the first quarter, this approach enabled us to reach unprecedented customer file levels for HSN and the Cornerstone Brands: Frontgate, Ballard Designs and Chasing Fireflies; drive digital sales growth of 10% with penetration up 200 basis points that contributed to overall net sales growth of 5%; launch our HSN digital site redesign across all HSN digital platforms; return value to shareholders through our share repurchase and cash dividend programs that included purchasing approximately 1.2 million shares in the first quarter; and grow earnings per share by 24% to $0.56 per share. At HSN, sales increased 2% to $550 million. Last year's results included 1 extra day of sales because of the leap year. Excluding the extra day of sales in the prior year quarter, HSN sales growth was 3%. We had considerable growth in beauty, apparel and accessories and home offset by decreased sales in electronics and jewelry and a 3% decline in shipping and handling revenue. Digital sales at HSN grew 4%, with digital sales penetration up 80 basis points to 36%. As we stated on the last earnings call, we expected that HSN digital sales will be tempered in the first quarter due to the launch of the digital site redesign, which is typical with any undertaking of this type. We continue to educate our customers on the unique attributes and functionalities of our platform in addition in making ongoing site enhancements and have recently seen improved performance. HSN's unit shipped increased 12% reflecting our focused efforts to drive customer growth and resulting in a 5% increase in our customer file. HSN's average price point decreased 9%.…

Thanks, Judy, and good morning, everyone. Thanks for joining us. I'm pleased with HSNi's first quarter performance and the progress we made in creating a powerful and differentiated retail experience. Across HSNi, we are reaching and engaging customers through content-rich immersive experiences on our multiple digital platform. These efforts contributed to our sales growth of 5%, digital sales growth of 10%, and EPS growth of 24%, and continue to return value to shareholders through our share repurchase and cash dividend program. As Judy mentioned, during the quarter, we delivered record customer results at both HSN and several of the Cornerstone Brands. In addition, our increasing digital reach now represents nearly half of the HSNi business. At HSN, sales increased 2%. And as Judy mentioned, last year's results included 1 extra day of sales because of the leap year. This performance was relatively in line with our expectations given the significant launch of our digital site redesign, which we reviewed with you on our last earnings call. We continued our dual-pronged focus on customers and digital expansion to capitalize on what we see is a significant sales growth opportunity that I'll review in more detail shortly. Our strong customer activity during the quarter not only demonstrates the effectiveness of our customer prospecting strategy, but also positions us for future growth. HSN ended the quarter with our largest customer file and retention rate on record. New customer growth was the strongest we've seen in nearly 5 years. These additional customers are largely entering from lifestyle categories that historically have a greater lifetime value compared to categories where customers typically make onetime purchases. We also had impressive growth in retained and reactivated customers. Best customers grew by 11% led by our loyalty-driven HSN credit card program, which now has over 1 million active…

[Operator Instructions] Our first question comes from Alex Fuhrman of Piper Jaffray.

Would like to ask a little bit about the new customer acquisition in the quarter. If I'm hearing you correctly, it sounds like the actual -- the growth in the customer file was actually the strongest you've seen in 5 years. Was that, in any way due, to the new website and higher engagement that was coming out of that? I mean, it sounds like conversion was up kind of in the back half of the quarter as customers got used to the new website. Is that a big driver of the new customer acquisition? Or is it really just more of what we're seeing with the increased mobile and tablet penetration and the shift towards beauty and other lifestyle categories?

Great question. And I think it's a combination of all of the things that you mentioned. Certainly, our focus on those customer acquisition categories, such as beauty, elements of home, accessories, et cetera, is definitely a driver of long-term value customer growth, which is really what we're focused on. Secondly, even with the site redesign, new customer acquisition through mobile platforms, as well as digital platforms, is definitely a driver of that growth as well. And then, certainly, our efforts in marketing, combined with all of those things, and then lastly our strategic collaborations and partnerships that extends our reach. So it definitely was a combination of all of those things.

Okay. And as a follow-up, I guess, as you think about extensions of the e-commerce business in mobile and tablet, could you talk a little bit more about the HSN Lounge? It sounds like this is almost kind of like a second channel that's being born out just on the online experience here? I mean, can you talk about maybe some of the, maybe which types of promotions are really working better on the HSN Lounge? Is it really the celebrity partnerships? Or does it have to do with certain product categories? Or is it really just a matter of when the execution is good on the Lounge side and the post follow-up activities there?

We're definitely testing a broad range of things through the Lounge. The goal of the HSN Lounge with live streaming, let's call it, dialogue, is really about extending the engagement. How could we leverage, post the live shows, and keeping our customer engaged through conversation, dialogue, product interest, et cetera. And it's everything from, certainly, a celebrity conversation where we're able to have a different dialogue than we can create in the live show when we're literally measuring that sales volume by minute. And what we saw with our recent test, when we had all of the stylists on, and the amount of customers that were really engaged in live chat, to hear what these authorities had to say. We think it's an opportunity for our customers to engage with their personalities and that would even include our hosts which we tested dialogue with them, too. And it just really speaks to how engaged our customer is, which is why, I think, we have seen that, that customer growth, that loyalty to our credit cards, they really like the idea of this extended engagement and we're going to continue to test a lot of things through the Lounge.

Our next question comes from Ben Mogil from Stifel. Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division: So on the shipping and handling side, I think you noted that you were down around 3% on that front. Is that tied to the pressures that you're seeing on pricing and consumer electronics that you've got to sort of continue that free shipping there given how competitive that particular vertical is? Or are you seeing some of the pressure on shipping and handling sort of pervasive across all categories?

I think shipping and handling and promotional pressures, I mean, they just exist in the marketplace. I mean, clearly, you didn't see it to the degree that you saw it in the fourth quarter. And we're trying to be very strategic about where we offer that to be able to maximize sales. And it's very different by category. But I wouldn't say that it's specifically related to electronics.

I'd say that you'd see more of that also in some of our home categories, our DIY and different categories like that. The same thing on the Cornerstone side and home as well. So it's not as much in your fashion accessories. But still, it is, as Mindy said, more broad-based than that. Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division: And is the return rate, the increase will it get a little bit tied to the mix that you saw in the quarter versus ...

That's a 100% tied to mix.

Yes. It's primarily because electronics was down in the quarter and electronics has a lower return rate than other categories. Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division: And then slipping over just to a broader question. We're now in May. As you sort of saw the quarter progress, you had payroll tax impacts, you've had gasoline come down, you obviously got a [indiscernible] released on April so far. Can you just give us a sense of what you saw those trends throughout the quarter look like? And then even into the current quarter?

I would say, in the quarter, I'm kind of trying to balance the trends because we had such a massive impact with the digital redesign. I mean, it'd be difficult for me to pinpoint it exactly. And then on the Cornerstone side, really, the impact there is more weather-related relative to that Frontgate customer. I mean, having said that, we're always cognizant of anything that's going to affect the consumers' wallet. And so we continually believe that you've got to focus on share gain, share of wallet, et cetera, because, again, I don't think there's a lot of incremental spending out there.

Our next question comes from Tom Forte of Telsey Advisory Group.

I had one question and one follow-up. So can you talk a little in the -- about the performance in the quarter about your mobile revenue versus your e-commerce revenue? So you've had the slowdown in conversion on the upgrade but it didn't seem to affect mobile. So can you talk about how the 2 are related or how they're unrelated?

Well, if you really look at the whole, I think with the tremendous increased usage just in tablet, I think a lot of people are just naturally gravitating to that as checkout, and we've obviously worked up a lot more engagement. And if you look at the digital redesign, it wasn't just our site itself, it was our other platforms. We've enhanced our marketing strategies for mobile. We see customers using multiple screens a lot more. So even if they're essentially watching the television, they are checking out or looking at a broader expanse of products on their mobile device. So again, we kind of look at the totality of the whole, but we absolutely see mobile utilization continuing to increase.

Great. And then my second question is for consumer electronics, it is my understanding that we had a transition from the TV cycle to the tablet cycle and that was why you saw the change in trends in sort of the ASPs and units. Are we now waiting for the next cycle on televisions, or are we waiting for the next generation of devices and tablets? How should we think about, I guess, the go forward for consumer electronics?

We still feel good about the consumer electrics business. It's just that, to your point, we were lapping kind of the shift in what consumers are buying. That's not to say we're not selling any televisions. It's just not a huge amount of new renovation that's driving the customer for replacements. And what customers tend to be buying are things related to mobile, to audio, to tablet, which, by nature, just -- it's interesting though, we just had an innovation event, a 24-hour innovation event at HSN. And you see customers gravitating to new streaming devices, we saw some success with connected TVs, but they're really looking for newness. And so those areas that have newness and the customers' really reacting to it, we're certainly out there on the forefront. I think we launched like 7 new launches that we had in that event. So they're definitely reacting to consumer electronics, it's just a different mix.

Our next question comes from Jason Bazinet of Citi.

I was just wondering if you might be able to help us with a sort of a clean revenue growth rate at Cornerstone year-over-year? I'm guessing -- I think from the numbers you -- given the disposition of Smith+Noble in territory head, you lowered the year-ago revenues. But I'm not sure if you added the Chasing Fireflies revenues that would've been in the year-ago period if you owned that asset last year?

Yes. So the numbers that we released do not include the territory head in Smith+Noble in last year's results. They also don't include last year Chasing Fireflies so where it does this year because we had acquired it on April 1 last year. So the only variance is related to Chasing Fireflies. So there was some impact on top line but you don't really contribute anything from a bottom line perspective. The first quarter is not a big quarter for them at all.

But in terms of a clean revenue number, in other words, if we stated it all pro forma, can you give us a sense of how fast Cornerstone was growing?

Yes, it was still double-digit.

Our next question comes from Anthony Lebiedzinski of Sidoti & Company. Anthony C. Lebiedzinski - Sidoti & Company, LLC: First of all, just looking at your G&A expenses. They were down about $1.8 million in the quarter. Was there anything unusual here in the quarter? And also, is this a sustainable trend going forward for expenses?

No, I think that most of that is timing related. There's not anything that's -- any significance, so I'd look at it broader over the period of the year. But I would say that expenses, in general, we will continue to manage as tightly as we can while we continue to invest in appropriate areas of growth for the company, but trying to recognize where we're at from a revenue perspective as well. So we're trying to balance all of those levers. Anthony C. Lebiedzinski - Sidoti & Company, LLC: Got it. Got it, okay. And as far as the HSN gross margin, can you just give us a breakdown of the components of that? The mix shift. How much did that help and how much was the free shipping promotions offsetting that?

Well, the vast majority of that is the product mix. So what we had -- we had an improvement in our product mix slightly declined by the shipping and handling promotions. I would say, from a product mix standpoint -- I mean, from a product standpoint, it was primarily mix-related. That was the primary driver of that. Though not any significant -- what you see is -- it's not -- wasn't significant. Shipping and handling revenue did decline 3%, so it have a negative, but not huge. Anthony C. Lebiedzinski - Sidoti & Company, LLC: Okay. And going forward, I mean, what would you expect as far as the mix shift changes and free shipping for the rest of the year?

Yes, again, I think you have to -- you can't derive anything from any one quarter, because each quarter is different based upon the type of product mix that we are selling. So, again, we're trying to look at our overall gross profit margin for the entire year. You will still continue to see some quarters that might have gross profit margins decline, particularly in the fourth quarter, as that mix shifts more to electronics, more promotional environments.

Our next question comes from Barton Crockett of Lazard Capital Markets.

I was curious about the weather impact in Cornerstone. Can you -- is there any way you can attempt to quantify that? How much of a drag it was this in this quarter? And how much of a lift it might be to the top line next quarter?

Well, I would say, more importantly, it was probably just more of a benefit last year. If you recall, we really did call that out because we had such a very large quarter for Frontgate last year. So we can't really quantify it. But we do feel really good about the product mix that we have at Frontgate. They've added 15 new outdoor sets -- yes, and we have the new book that Mindy had mentioned. I mean, the product looks great. It's going to be, early on, weather-related. So they continue to have a very large months in May and June. So it's still too early to say. But I think we're definitely locked and loaded for, hopefully, the weather to improve. It continues to be choppy around the country.

And it's not just Frontgate, it's Grandin Road as well.

Grandin, too. That's right. I'm sorry.

Which we have seen very strong results in that business.

I would say though that from an overall standpoint, we did experience higher back orders than normal -- at several of our businesses, particularly Ballard and Garnet Hill. So some of our products had a lot more additional demand than we were -- had the inventory for, so...

It's a good and bad problem.

Okay. And then if I could follow up with a little bit longer-term question perhaps. One of the opportunities, I think, people would see, particularly with your Cornerstone catalogs like Frontgate and others, is that as the housing market recovers, your catalogs are in categories that might particularly benefit from that. And I'm just wondering if you're seeing any evidence of any lift from a recovering housing market and what you see in your business?

I can't say I'm attributing anything specifically to the housing market. Because if I really look by brand, and if I look at a brand like Ballard whose business is extremely strong, I truly believe it's because of their strategies and their products and what they're doing. Now, I'll certainly take the lift as the housing market recovers, but I think it's important that they had natural growth based on the strategies that they're implementing.

Our next question comes from Trisha Dill with Wells Fargo.

I just had a couple on the digital business. First of all, did digital business get better throughout the quarter as customers got used to the new site? Or do you think this will take another couple of quarters or so before customers get used to...

As we mentioned, we saw, after let's call it, the 6-week period going into March, improvement. I mean, as you know, we have a very tried, true, loyal customer and you got to walk her through change maybe a little bit more than somebody who's just kind of a hunt-and-peck sort of customer. We saw that come back in March. And we still have enhancements that are going in. Obviously, we launched January 8, but that wasn't where we stopped. I mean, we have other implementations going in across the second quarter and we expect improvement as we continue. And we're seeing our scores certainly in a great place. It's a pretty unique experience.

Okay. And then digital sales have been growing below the overall e-commerce market. Do you think you can grow this business above market rates? And what do you think you need to do to get there?

Well, I think you've seen in other quarters, for example, fourth quarter, strong digital sales that were more akin to the market. And certainly, that's our intent and goal and was part of our reasoning for the relaunch -- and if you remember, the relaunch was not just the experience itself, but we really needed to rebuild the core fundamental technology to give us the type of flexibility to do things that we felt were going to be more competitive. So certainly, that is our intent.

And then one last one on the digital business. As we think about online tax, the legislation moving forward and ultimately, passing at some point, how do you think about this impacting the digital business? And have you seen in states where you do collect sales tax, lower growth than in other states? Or maybe did you see initial reactions in states like New York when sales tax was implemented several years ago?

Yes. With about overall of our business, about 60% of our sales are subject to some type of sales tax collection across HSN Inc. I think we've stated that previously. So there is a portion of our sales that we don't collect sales tax on. And you're referring to the state of New York, I think, it was in 2008. That particular state -- there was definitely an impact in New York in 2008, but for me to say it was definitively related to the sales tax and it was in 2008, would not be a fair assumption. However, there have been some other smaller states that we do see initial impacts related to that sales tax collection. There haven't been a lot of those changes. I can't really give you a good number on that. But I would say that, yes, that I think there is a reaction to the consumer when you start collecting sales tax. But if it's widespread and everyone collects sales tax, I can't say exactly what would occur in that instance. However, anytime you take money out of the consumers' wallet, there will be some impact most definitively.

Our next question comes from Victor Anthony of Topeka Market.

Two quick questions. The first one. Several retailers have been talking up the benefits of Mother's Day, graduation and Father's Day in this particular quarter. Haven't heard the TV shopping networks actually talk about these days. I wonder if you could give us a sense of how those events impact sales?

We don't tend, other than Christmas, obviously, which is -- and holiday. We don't have the same kind of shifts in our business, things like Easter, Mother's Day, Father's Day. We actually do have a nice Mother's Day business and promotion. But a lot of our customers, she's buying for her, so she's getting herself a gift for Mother's Day. We have some Father's Day shows, but that's more electronics. But we don't have those kind of peaks and shifts in promotions for those holidays.

Okay. And the second is really with your contracts with your distributors. I wonder if you could just give us a quick update of where you stand in terms of any sort of renewals that's coming up? Anything we need to be concerned about?

We still have the same contracts that are renewed or not renewed from our filing at our 10-K. So there's been no changes since that time.

There appears to be no further questions. I will now turn the call back over to Ms. Grossman.

Well, thanks, everyone. And thanks for being with us this morning.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.

Thank you.