topic Re: Qurate Financial Report - down 3% in 2021 in Q Talk

Qurate Financial Report - down 7% in Q4 2021

banned again — Fri, 25 Feb 2022 17:43:20 GMT

Qurate Retail, Inc. Reports Fourth Quarter and Year End 2021 Financial Results

Qurate Retail, Inc. ("Qurate Retail") (Nasdaq: QRTEA, QRTEB, QRTEP) today reported fourth quarter and year end 2021 results(1).

“As a team we are focused on a turnaround of this business that will modernize the value proposition, stabilize our core flagship brands and capitalize on growth opportunities,” said David Rawlinson, President and CEO of Qurate Retail. “In the fourth quarter, we managed through a number of continuing challenges and are not pleased with the performance. We feel confident in our ability to deliver, although we know it will take time to improve some aspects of the business and innovate.”

“As we concentrate on enhancing the value proposition and establishing a new growth path, we are maintaining a focus on cost control and free cash flow generation. We believe that we can sustain strong free cash flow while we manage through these transitions and invest in the future.”

Fourth quarter and full year 2021 operating results:

Total Qurate Retail revenue decreased 9% to $4.1 billion in Q4, and decreased 1% to $14 billion in full year
- In constant currency(2) revenue decreased 8% in Q4 and 1% in full year
- eCommerce revenue decreased 9% to $2.6 billion or 65% of total revenue in Q4, and decreased 1% to $8.8 billion or 63% of total revenue in full year
Qurate Retail reported diluted EPS of $(0.54) in Q4 and $0.82 in full year
- Adjusted diluted EPS(3) of $0.40 in Q4 and $1.73 in full year
QxH revenue decreased 7% in Q4 and 3% in full year
QVC International revenue decreased 9% in Q4 and increased 4% in full year
- In constant currency, revenue decreased 5% in Q4 and increased 2% in full year
Zulily revenue decreased 30% in Q4 and 11% in full year
Cornerstone revenue increased 8% in Q4 and 16% in full year

Corporate updates:

Distributed special cash dividend of $1.25 per common share on November 22, 2021, for an aggregate dividend of approximately $488 million
From November 1, 2021 through January 31, 2022, repurchased 18.2 million QRTEA shares at an average price per share of $9.22 (unadjusted for special cash dividend distribution) and total cost of $168 million
As of December 31, 2021, all 3.50% MSI exchangeable debentures were exchanged or redeemed for a net cost of $315 million, after settlement of financial instruments

Discussion of Results

Unless otherwise noted, the following discussion compares financial information for the three months and year ended December 31, 2021 to the same periods in 2020.

QxH

QxH revenue declined in the fourth quarter primarily due to a 6% decrease in units sold, reflecting supply chain constraints and product scarcity for home and electronics. Average selling price was flat in the quarter. QxH experienced a 12% increase in average spend per customer and an 11% increase in items purchased per customer, which were offset by a decline in customer count versus 2020’s solid gains. QxH reported declines primarily in home and electronics, partially offset by growth in apparel and beauty. For the full year, QxH revenue decreased due to a 2% decline in average selling price and 1% decrease in units sold. QxH saw an 8% increase in average spend per customer and a 10% increase in items purchased per customer for the full year, which were offset by reduced customer count. QxH experienced declines in home, electronics and beauty, partially offset by growth in apparel and accessories.

In the fourth quarter, operating income and adjusted OIBDA margin(3) decreased primarily due to higher fulfillment (freight and warehouse) and marketing expenses, lower product margins, higher fixed costs and bad debt expense. These pressures were partially offset by lower incentive compensation accruals. For the full year, operating income and adjusted OIBDA margin decreased primarily due to higher fulfillment and marketing expenses, partially offset by lower incentive compensation accruals and lower inventory obsolescence and bad debt expense.

For the quarter and full year, operating income includes $21 million of costs related to the fire that occurred at QVC’s Rocky Mount, NC fulfillment center on December 18, 2021. Rocky Mount was Qurate Retail’s second-largest fulfillment center, processing approximately 25% to 30% of volume for QVC-US and serving as QVC-US’s primary returns center for hard goods. The building was significantly damaged because of the fire and related smoke and will be closed for the foreseeable future. The Company has taken steps to mitigate disruption to operations including diverting inbound orders to its other fulfillment centers and will continue to leverage its existing fulfillment centers in the near-term. Excluding Rocky Mount, QxH operates eight fulfilment centers in the US.

In the fourth quarter, QxH incurred fire related costs of approximately $250 million, which includes (i) $134 million in loss on inventory, (ii) $87 million in loss on fixed assets, and (iii) $29 million in other fire related costs, including $21 million of costs that were not fully reimbursable by QVC’s insurance policies, primarily related to shut down pay and severance expense that were netted with expected insurance recoveries. Based on the provisions of QVC’s insurance policies, Qurate Retail has determined that recovery of certain fire related costs is probable, and an insurance receivable balance of $129 million, net of $100 million of insurance proceeds received in advance, has been recorded as of December 31, 2021. As of the date of this release, Qurate Retail is still in the process of assessing damage to property and inventory and submitting relevant insurance claims. There is approximately $117 million of inventory at the Rocky Mount facility that is currently being assessed for damage and is included on the consolidated balance sheet as of December 31, 2021. We anticipate any additional inventory losses will be covered by our insurance policies. QxH expects to continue to record additional costs and recoveries until the property and inventory assessment is complete and the insurance claim is fully settled. While the Company has started taking steps to minimize the overall impact to the business, we expect a negative impact to net sales because of lost inventory as well as increased warehouse and logistics costs in 2022.

QVC International

For the quarter, US Dollar denominated results were negatively affected by exchange rate fluctuations. The US Dollar strengthened 8% versus the Japanese Yen and 4% against the Euro, partially offset by weakening 2% versus the British Pound. For the full year, US Dollar denominated results were positively affected by exchange rate fluctuations. The US Dollar weakened 7% versus the British Pound and 3% against the Euro, partially offset by strengthening 3% versus the Japanese Yen. The financial metrics presented in this press release also provide a comparison of the percentage change in QVC International’s results in constant currency (where applicable) to the comparable figures calculated in accordance with US GAAP for the fourth quarter and full year 2021.

QVC International’s constant currency revenue declined in the fourth quarter primarily due to a 6% decline in units sold. Average selling price was flat. QVC International also experienced supply chain constraints in Europe and reported declines primarily in home, beauty and electronics. For the full year, QVC International’s constant currency revenue grew primarily due to a 2% higher average selling price, partially offset by fewer units sold. QVC International reported revenue growth primarily in apparel, home and jewelry, partially offset by a decline primarily in electronics.

For the fourth quarter and full year, operating income and adjusted OIBDA margin increased primarily due to lower management incentive accruals and inventory obsolescence expenses and higher product margins, partially offset by fixed cost deleverage.

Zulily

For the quarter and full year, Zulily revenue decreased, primarily reflecting supply constraints and marketing challenges.

Operating loss for the quarter and full year increased primarily due to a $363 million non-cash impairment charge related to Zulily’s tradename and goodwill incurred in the fourth quarter of 2021.

Adjusted OIBDA margin decreased in the quarter primarily due to fixed cost deleverage and higher fulfilment and bad debt expenses, which were partially offset by higher product margins, lower marketing expense due to reduced spend and lower management incentive accruals. For the full year, adjusted OIBDA margin decreased primarily due to higher fulfillment, fixed costs and marketing expenses, which were partially offset by lower management incentive accruals and higher product margins.

Cornerstone

For the quarter and full year, Cornerstone generated record revenue growth at each of its brands. This is primarily due to strong growth in its home brands (Frontgate, Ballard Designs, and Grandin Road) and demand for apparel and home products at Garnet Hill. For the quarter, operating income and adjusted OIBDA margin decreased primarily from higher freight and marketing costs, which were partially offset by product margin gains. For the full year, operating income and adjusted OIBDA margin increased primarily from sales growth, product margin gains and fixed cost leverage, which were partially offset by higher freight costs.

Re: Qurate Financial Report - down 3% in 2021

banned again — Fri, 25 Feb 2022 17:42:06 GMT

Re: Qurate Financial Report - down 7% in Q4 2021

Caaareful Shopper — Fri, 25 Feb 2022 17:52:57 GMT

Leslie Ferraro, President of QxH (which comprises QVC US and HSN), left January 14, 2022. Leslie joined Qurate Retail Group in 2019 and led the integration of the QVC US and HSN businesses.

That was a short tenure

Prior to Qurate, Leslie spent 17 years at the Walt Disney Company, most recently as co-chair, Disney consumer products and interactive media and president, Disney consumer products. In this role, Ferraro led the Disney store and consumer product businesses.

Re: Qurate Financial Report - down 7% in Q4 2021

banned again — Fri, 25 Feb 2022 17:55:56 GMT

@Caaareful Shopper Why would she stick around? She thought she was going to get the top job- their first female CEO. They went with a different first instead.

Re: Qurate Financial Report - down 7% in Q4 2021

BirkiLady — Fri, 25 Feb 2022 18:01:08 GMT

@Caaareful Shopper Leslie Ferraro quickly saw the writing on the wall and found other employment. She's a smart woman; her career will go much further in her new endeavor.

Re: Qurate Financial Report - down 7% in Q4 2021

Kachina624 — Fri, 25 Feb 2022 18:18:43 GMT

Sounds as though Zulily is about to crater. They were doing so well, increasing every quarter, until Qurate bought them. They seem to have lost many of their better vendors, prices increased.

Re: Qurate Financial Report - down 7% in Q4 2021

On It — Fri, 25 Feb 2022 18:40:38 GMT

My eyes glass over when I see these reports. I may ask my husband to take a look later and explain it to me, but I do have a question. Down from what? 3rd quarter, previous 4th quarter? I don't think they will ever have the audience they had in 2020 when everyone was sheltering at home. New customers were mentioned often on air. A decline would be expected if compared to the previous 4th quarter. In addition this past 4th quarter would have been the one most affected by the supply chain issues which occurred significantly in that quarter.

Re: Qurate Financial Report - down 7% in Q4 2021

Kachina624 — Fri, 25 Feb 2022 18:50:45 GMT

This report gives both fourth quarter and year end results. If they're talking fourth quarter, its down from third quarter.

I think they lost many customers due to delays in shipping, which they refused to discuss or explain until suddenly they did, but it was too late. They've always suffered from lack of transparency.

Re: Qurate Financial Report - down 7% in Q4 2021

Caaareful Shopper — Fri, 25 Feb 2022 18:53:35 GMT

@On It wrote:
My eyes glass over when I see these reports. I may ask my husband to take a look later and explain it to me, but I do have a question. Down from what? 3rd quarter, previous 4th quarter? I don't think they will ever have the audience they had in 2020 when everyone was sheltering at home. New customers were mentioned often on air. A decline would be expected if compared to the previous 4th quarter. In addition this past 4th quarter would have been the one most affected by the supply chain issues which occurred significantly in that quarter.

@On It

QxH revenue decreased 7% in Q4 and 3% in full year:

That's QVC & HSN combined (QxH) revenue decreased 7% in the 4th Qtr. 2021 compared to the 4th Qtr. 2020.

Revenue decreased 3% in the full year 2021 compared to the full year 2020.

Re: Qurate Financial Report - down 7% in Q4 2021

Johnnyeager — Fri, 25 Feb 2022 19:06:04 GMT

The declines reported are Year Over Year (YOY), not quarter to quarter.

YOY is used due to quarterly seasonality factors.

3Q21 QxH Revenue: $1.813 billion

4Q21 QxH Revenue: $2.539 billion

An increase of 40% quarter to quarter due to the holiday shopping season.

Re: Qurate Financial Report - down 7% in Q4 2021

bonnielu — Fri, 25 Feb 2022 19:47:47 GMT

Losing out. High prices. Shipping costs and lots of competition.

Re: Qurate Financial Report - down 7% in Q4 2021

Spurt — Fri, 25 Feb 2022 20:47:31 GMT

@On It wrote:
My eyes glass over when I see these reports. I may ask my husband to take a look later and explain it to me, but I do have a question. Down from what? 3rd quarter, previous 4th quarter? I don't think they will ever have the audience they had in 2020 when everyone was sheltering at home. New customers were mentioned often on air. A decline would be expected if compared to the previous 4th quarter. In addition this past 4th quarter would have been the one most affected by the supply chain issues which occurred significantly in that quarter.

@On It

Prior to the pandemic revenues and sales were down, when Covid caused everyone to quarantine in their homes, Qurate (QVC/HSN) picked up in revenues and sales, however, as restrictions were relaxed and people were about and about more the last quarter didnt turn out so good anx that was the Holiday season....now part of it was supply/manufacturing issues but a lot of it was where they were before the pandemic.....

Here's from the PressConference-

David Rawlinson

Part of what we saw through the fourth quarter among competitors, of course we saw them taking some price in regard to inflation, but we also saw store traffic go back up. We saw a lot of brick and mortar either reopen or advertising campaigns driving people back to stores. You also saw an increase in digital marketing which drove some digital marketing inflation throughout the market, and then finally click-and-collect, order online and pick-up at store also grew substantially, so you saw the market sort of rebalancing from online back to a more natural mix, probably, of offline, and I think you also saw people getting out of the house and getting offline a touch in terms of how they balance their shopping. We definitely saw those trends and I think it just makes for, once again, a richer competitive environment than what we faced as the pandemic concentrated some of the trends.

Re: Qurate Financial Report - down 7% in Q4 2021

Puppy Lips — Fri, 25 Feb 2022 19:54:59 GMT

The decline in sales does not surprise me. I had my reasons for buying less, as I am sure many people did.

There are so many options now for buying "stuff." Plus, I think their customer base is aging, and wanting/needing less "stuff." QVC does not really appeal to younger people in my opinion, no matter how hard they try.

I don't think QVC will go under any time soon, but I don't think they will ever reach sales numbers they used to. This is only my opinion, of course. We will see how they do this year.

Re: Qurate Financial Report - down 7% in Q4 2021

Frenchlop — Fri, 25 Feb 2022 19:57:50 GMT

Isn't it still an incredible amount of money to make?

Re: Qurate Financial Report - down 7% in Q4 2021

Spurt — Fri, 25 Feb 2022 20:57:59 GMT

@Johnnyeager wrote:
The declines reported are Year Over Year (YOY), not quarter to quarter.

YOY is used due to quarterly seasonality factors.

3Q21 QxH Revenue: $1.813 billion
4Q21 QxH Revenue: $2.539 billion

An increase of 40% quarter to quarter due to the holiday shopping season.

@Johnnyeager

Here's quarter to quarter...

We did not expect our fourth quarter results to deteriorate at this rate and thought it was important to issue the pre-release for transparency. As we enter this turnaround, we will continue to try to help the markets understand our progress.

Obviously we are not pleased with our Q4 performance.

Re: Qurate Financial Report - down 7% in Q4 2021

Johnnyeager — Fri, 25 Feb 2022 20:02:44 GMT

Prior year comparisons.

Re: Qurate Financial Report - down 7% in Q4 2021

Spurt — Fri, 25 Feb 2022 20:14:01 GMT

@Frenchlop wrote:
Isn't it still an incredible amount of money to make?

@Frenchlop

That's before any deductions, you have to look at the OBIDA. OIBDA is operating income before depreciation and amortization.

Re: Qurate Financial Report - down 7% in Q4 2021

Frenchlop — Fri, 25 Feb 2022 20:27:21 GMT

Gotcha, I didn't know

Re: Qurate Financial Report - down 7% in Q4 2021

Gabidog — Fri, 25 Feb 2022 20:39:39 GMT

I believe it has been a tough year for retail but I think Macys had a pretty good year. QVC did have the fire and hopefully will recover. On the other hand I noticed QVC is now offering pre owned designer handbags for thousands of dollars. Affinity line has too many rings over two thousand dollars and not enough under one thousand. Who do the buyers think is watching 24/7? When I check in each day to look at the new items I do not recognize many of the brands and most are never presented. Even the food items at times you cannot find the nutrition information. The plants often do not have a growing guide! I have to go to another garden website and look up whether it is for sun or shade. Get back to some basics and priorities...there is no need for a 24/7 multi channel retail site if folks are not watching.

Re: Qurate Financial Report - down 7% in Q4 2021

Caaareful Shopper — Fri, 25 Feb 2022 20:47:20 GMT

@Gabidog wrote:
I believe it has been a tough year for retail but I think Macys had a pretty good year. QVC did have the fire and hopefully will recover. On the other hand I noticed QVC is now offering pre owned designer handbags for thousands of dollars. Affinity line has too many rings over two thousand dollars and not enough under one thousand. Who do the buyers think is watching 24/7? When I check in each day to look at the new items I do not recognize many of the brands and most are never presented. Even the food items at times you cannot find the nutrition information. The plants often do not have a growing guide! I have to go to another garden website and look up whether it is for sun or shade. Get back to some basics and priorities...there is no need for a 24/7 multi channel retail site if folks are not watching.

@Gabidog There has always been a very huge market for pre-owned luxury handbags. Plus, QVC is offering 18-month financing. If you check QVC's inventory of them, many are already Sold Out. There may be only one or two each, but they are indeed selling. I saw it posted on Instagram, and some posters seem to be losing their minds over QVC having these pre-owned designer handbags now.