Wow, another lousy quarterly report. It might improve if they brought their systems, presentations, and products into this century.
Third quarter 2022 operating results:
- Qurate Retail revenue decreased 13% to $2.7 billion
- In constant currency(2) revenue decreased 9%
- eCommerce revenue decreased 13% to $1.7 billion or 62% of total revenue
- Qurate Retail reported diluted EPS of $(7.21), including impact of non-cash impairment recognized at QxH and Zulily related to tradenames and goodwill (additional detail below)
- Adjusted diluted EPS(3) of $(0.08)
- QxH revenue decreased 8%
- QVC International revenue decreased 21%
- In constant currency, revenue decreased 5%
- Zulily revenue decreased 39%
- Cornerstone revenue increased 8%
Other business headlines:
- Completed sale and leaseback of five US properties in July for proceeds of $443 million
- Entered into agreement for sale and leaseback of UK and Germany fulfillment centers for gross consideration of approximately £68 million and €97 million, respectively; expected to close first quarter 2023
- Cash proceeds expected to be used to repay debt
- Received $180 million of insurance proceeds in third quarter related to Rocky Mount, NC fulfillment center fire; $280 million of insurance proceeds received year-to-date
Corporate Updates
On July 15, 2022, QVC, Inc. (“QVC”) and certain of its subsidiaries entered into a sale and leaseback agreement with investment vehicles managed by Oak Street, a division of Blue Owl, for five existing properties in Pennsylvania, South Carolina, Tennessee and Virginia. Under the terms of the agreement, QVC received a cash payment of $443 million, net of fees and other expenses. The average annual impact to adjusted OIBDA related to the sale and lease back transactions will be approximately $33 million.
Subsequent to quarter end, on November 2, 2022 and November 3, 2022, certain subsidiaries of QVC International signed agreements with investment vehicles managed by Oak Street, a division of Blue Owl, for the sale and leaseback of two existing properties in Germany and the UK. The sale and leaseback agreements are expected to close in the first quarter of 2023. Under the terms of the agreements, QVC will receive cash payments of approximately €97 million related to its German facility and approximately £68 million related to its UK facility before fees, taxes and other expenses.
Cash proceeds received by QVC were used and are expected to be used to repay debt upon each closing. The gain from each completed property sale in the relevant measurement period is included in operating income and within the covenant calculations under QVC’s bank credit facility.
Additionally in the third quarter, as a result of recent financial performance of certain subsidiary businesses, macroeconomic conditions including inflation and higher interest rates and a decline in its stock price, Qurate Retail initiated a process to evaluate those subsidiaries’ current business models and long-term business strategies. It was determined during the third quarter that an indication of impairment existed for the QxH and Zulily reporting units related to their goodwill and the HSN and Zulily tradenames. The impairment primarily reflects a significant increase in discount rates used, combined with recent business performance that is partially attributed to the challenged economic conditions. Non-cash tradename impairments in the amounts of $180 million for QxH (related to HSN) and $140 million for Zulily were recorded in the impairment of intangible assets line item in the consolidated statements of operations, and goodwill impairments were recorded in the amounts of $2.5 billion and $226 million for QxH and Zulily, respectively. These items are included in operating income and excluded from adjusted OIBDA.
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