The HSN vs. QVC Dynamic: Expert Analyst From Gabelli Says Both Are "Made For The Web"

• On 10:51 am EDT, Thursday October 22, 2009

67 WALL STREET, New York - October 22, 2009 - The Wall Street Transcript has just published its Online And Direct To Consumer Retailing Report offering a timely review of the sector to serious investors and industry executives. This 38 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Online Retailer Profit Margins Vs. Bricks-And-Mortar Retailers - Uptick In Internet Commerce - Secular Shift In Market Share To Internet Retailers - Post-Crunch Consumer Confidence - Growing Market Share For Online Travel Agents - Possible Consolidation Of HSN, Inc. - Amazon As The "Wal-Mart Of The Internet" - Online Marketing Vs. In-Store Marketing - Maximized Markdowns - Online Traffic Conversion Rates - Social Networking To Drive Brand Awareness - Online Sales Holiday Outlook - E-Commerce As A Path To International Expansion

Companies include: Abercrombie & Fitch (ANF); Amazon (AMZN); Ann Taylor (ANN); Apple (AAPL); Ask.com (IACI); Bebe (BEBE); Best Buy (BBY); Bidz.com BIDZ); Dell (DELL); Dick's Sporting Goods (DKS); Expedia (EXPE); GSI Commerce (GSIC); GameStop (GME); Gap (GPS); General Motors (GM); Google (GOOG); HSN (HSNI): Hot Topic (HOTT); Interactive Corp. (IAC); Liberty Media Interactive (LINTA); LivePerson (LPSN); MercadoLibre (MELI); Move Inc. (MOVE); Orbitz (OWW); Pacific Sunwear (PSUN); Quiksilver (ZQK); Ralph Lauren (RL); ShopNBC/ValueVision (VVTV); South Korea's Gmarket (EBGMy); Sport Supply Group (RBI); Staples (SPLS); Starbucks (SBUX); Target (TGT); Timberland (TBL); Urban Outfitters (URBN); VeriSign (VRSN); Wal-Mart (WMT); WebMD (WBMD); eBay (EBAY); hhgregg (HGG); priceline.com (PCLN).

In the following brief excerpt from just one of the in depth interviews in the 38 page report, expert stock picker Scott Marangi discusses the outlook for the home shopping sector and for investors.

Christopher J. Marangi, Senior Vice President of GAMCO Investors, Inc., is Associate Portfolio Manager of the Gabelli Value Fund, a $500 million open-ended mutual fund that invests in a concentrated portfolio of securities selling below their private market values. Mr. Marangi has appeared on Bloomberg television and radio, and has been quoted extensively in publications including The Wall Street Journal, The New York Times, Barrons, Newsday, Bloomberg, Variety and Broadcasting & Cable. Mr. Marangi joined GAMCO in 2003 as a Research Analyst, covering companies in the cable, satellite and entertainment sectors. He began his career as an Investment Banking Analyst with J. P. Morgan & Co and later joined private equity firm Wellspring Capital Management. Mr. Marangi graduated magna cum laude and Phi Beta Kappa with a B.A. in political economy from Williams College, and holds an MBA with honors from the Columbia Graduate School of Business. He and his wife have three children.

TWST: Was the spin-off of HSN from IAC a good thing for investors and will continue to create value in the mid to long term?

Mr. Marangi: Yes, I think the spin-off was good for investors. It has created strategic opportunities for HSN, focused both management and investors on the upside of HSN, and eliminated for some people questions about capital allocation at the holding company level.

TWST: Excluding Cornerstone, HSN's sales have barely declined in a difficult economy. In your view, what have they done right that's allowed them to maintain revenues while so many other companies are struggling?

Mr. Marangi: The video-retailing model gives them certain advantages over traditional retail, in being able to change their marketing and merchandising on a dime. Mindy Grossman and her team have gotten the basics right. They've improved their merchandising, they've improved their customer care, their marketing and, with the exception of the cyclical downturn, they would have been doing much better.

TWST: What advantages does HSN has over QVC?

Mr. Marangi: QVC has scale, which comes with more favorable distribution costs. But HSN, starting from a lower base, has room to grow, has room to take share from QVC and traditional retailers.

TWST: With many traditional retailers building e-commerce sites and playing more in that space, how big is the risk that HSN will lose market share to traditional retailers?

Mr. Marangi: HSN and QVC are made for the Web. They have thousands of hours of video content that can be repurposed for the Web. And many of their same advantages on the air are played out on the Web. They have either unique merchandise or unique bundles of merchandise with identifiable brands.

TWST: HSN's Cornerstone catalog business is lagging compared to the other side of their business. What would you like to see them do with it and what do you think they will actually do?

Mr. Marangi: Step one is for them to limit the cash outflows. Cornerstone has done a very good job of that, given the economic backdrop. The business is non-core to the rest of HSN. It's probably worth more to somebody else at some point. I think what they do with Cornerstone hinges largely upon what Liberty (LINTA) might do with HSN.

TWST: What would a merger of HSN and QVC look like and what would it mean for investors?

Mr. Marangi: Liberty Interactive, to which QVC is attributable, already owns a third of the company. They have two board seats. QVC knows this business, they've looked at potential synergies for many years and we think there are some synergies between the businesses. The overriding philosophy at Liberty is to turn financial assets, where they can, into operating assets, and a consolidation of HSN would do that.

TWST: Is it imminent?

Mr. Marangi: There is a standstill in place through August 2010, although under certain scenarios they can do a deal sooner than that.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 38 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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