Q Talk

[Spurt]

ENGLEWOOD, Colo.--(BUSINESS WIRE)--Nov. 4, 2020-- Qurate Retail, Inc. ("Qurate Retail") (Nasdaq: QRTEA, QRTEB, QRTEP) today reported third quarter 2020 results (1).

“Our performance was outstanding this quarter. We generated strong growth in revenue, OIBDA, free cash flow and new customers, reflecting broad-based strength in home-related products,” said Mike George, President and CEO of Qurate Retail. “We are particularly pleased with our consolidated adjusted OIBDA up 24% and gains at all our business units.

We believe our strategic priorities and continued investments in innovation position us well to sustain our momentum in the long term. Qurate Retail offers a unique blend of media assets, particularly our leadership in livestreaming, and retail core competencies centered on curating appealing merchandise and building loyal customer relationships through highly engaging content. This combination provides a valuable competitive advantage in the evolving retail marketplace.”

Third quarter operating results:

• Total Qurate Retail revenue increased 10% to $3.4 billion
  • Revenue increased 9% in constant currency(2)
  • eCommerce revenue grew 15% to $2.1 billion or 62% of total revenue
• Qurate Retail reported diluted EPS of $0.80
  • Adjusted diluted EPS(3) increased 36% to $0.57
• QxH revenue increased 7% to $2.0 billion
•  
• QVC International revenue increased 11% to $723 million
  • Revenue increased 8% in constant currency
• Zulily revenue increased 10% to $395 million
• Cornerstone revenue increased 26% to $285 million

QxH

Revenue increased on higher unit volume, reduced customer returns and an increase in shipping and handling revenue, partially offset by a reduction in average selling price. QxH reported growth in home and accessories, which was partially offset by declines primarily in apparel and electronics.

Gross margin increased primarily due to improved product margins, as the negative impact of category mix was more than offset by favorable customer returns and shipping and handling revenue, strategic promotional and pricing actions and vendor negotiations. The product margin gains were partially offset by higher fulfillment (warehouse and freight) and inventory obsolescence expenses. The fulfillment pressure was mainly associated with general freight rate increases, increased distribution costs in connection with the opening of the Bethlehem fulfillment center, increased wage rates and reduced pack factor. Operating income and adjusted OIBDA margin(3) increased reflecting the improved gross margins, lower bad debt expense and TV commissions, partially offset by higher marketing expense and incentive compensation accruals.

QVC International

US Dollar denominated results were positively affected by exchange rate fluctuations, primarily due to the Dollar weakening 5% versus the Euro and British Pound and 1% against 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 third quarter of 2020.

QVC International reported revenue growth in all categories, except jewelry which was flat. Constant currency revenue increased in all markets.

Gross margin rate increased primarily due to improved product margins, which reflect favorable customer returns and shipping and handling revenue which more than offset unfavorable mix impact. Operating income and adjusted OIBDA margin increased primarily due to revenue growth, gross margin improvement and lower administrative costs and TV commissions, partially offset by higher incentive compensation accruals.

Zulily

Zulily revenue increased on higher average selling price and unit volume. Gross margin increased primarily due to higher product margins, partially offset by higher freight costs. Operating income and adjusted OIBDA margin increased primarily due to lower marketing expense, partially offset by higher incentive compensation accruals. Zulily recognized a $1 billion non-cash impairment charge related to its tradename and goodwill in the third quarter of 2019.

Cornerstone

Cornerstone revenue increased due to strong demand in its home brands (Frontgate, Ballard Designs, and Grandin Road), partially offset by weakness in apparel at Garnet Hill. Operating income and adjusted OIBDA margin increased primarily from sales growth and gross margin expansion driven by higher product margins.

[FancyPhillyshopper]

Maybe jewelry is flat because there are no jewelry shows anymore!  (And prices are SKY-HIGH)

Glad to see QVC is so successful during this pandemic!

[Spurt]

With more people staying home and more viewers tuning into QVC/HSN (Qurate) the company continues to make finncial revenue gains during the pandemic....

Many customers and viewers have provided feedback on the Forum regarding Qurates apparel lines. And the latest financial report continues to mention declines in apparel sales....Perhaps Qurate should listen to customer comments that cite inconsistent sizing, the increase in prices (better deals elsewhere), and QVC's different clothing lines pretty much all look alike....more variety is needed....and many have mentioned fashion show formats/hosts----- if people aren't watching this impacts sales too.............

[Spurt]

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@FancyPhillyshopper wrote:

Maybe jewelry is flat because there are no jewelry shows anymore!  (And prices are SKY-HIGH)

Glad to see QVC is so successful during this pandemic!

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@FancyPhillyshopper 

The jewelry sales were flat in their overseas markets, but even in the U.S. there have been declines in jewelry sales too

[stevieb]

I was going to say, I'm glad this pandemic has been beneficial for somebody. No matter how they might try to spin this success as something for which they are responsible... just as they try to spin more often miserable numbers as being due to factors out of their control... their improved sales are almost certainly due to the virus. I could see their numbers staying up for a while longer, assuming restrictions and limitations resulting from this crisis remain and the shopping public also remains wary of venturing out. At some point, assuming they don't make needed improvements, assuming other businesses survive and once the American public at large once again feels safe leaving their homes, I'd guess we'll see very different reports once again and once again, they won't be pretty.

[Spurt]

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@stevieb wrote:

I was going to say, I'm glad this pandemic has been beneficial for somebody. No matter how they might try to spin this success as something for which they are responsible... just as they try to spin more often miserable numbers as being due to factors out of their control... their improved sales are almost certainly due to the virus. I could see their numbers staying up for a while longer, assuming restrictions and limitations resulting from this crisis remain and the shopping public also remains wary of venturing out. At some point, assuming they don't make needed improvements, assuming other businesses survive and once the American public at large once again feels safe leaving their homes, I'd guess we'll see very different reports once again and once again, they won't be pretty.

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@stevieb 

Yep, you make some great points...what will happen to Qurates revenues when the pandemic slows down and more people venture out and start shopping in local stores. 

Perhaps customers tired of restrictions and staying home will want to be able to get their purchases immediately and don't want to deal with delays in shipping....nor shipping costs.... And I also think of about when  restrictions are removed such as customers are allowed to try on clothes in stores once again...

Yes indeed, it will be interesting to see how Qurate fairs in the future and if they will return to their revenue struggles like they experienced before the pandemic.....

But I am puzzled by Mr. George's comments regarding "curating appealing merchandise and building loyal customer relationships through highly engaging content....."  I keep seeing the same products over and over...

[Still Raining]

Have to chuckle about the inventory obsolescence expenses.

[mspatmac]

If we have learned anything this year it's how fast things can change and we have no clue what it's all going to look like. To new customers everything is new to them on the Q. Some will stick around and are not jaded as many of us are on the boards. Posters are a minuscule number compared to the number of customers. Even on the boards there are core groups of posters. Many don't watch or buy anymore.  More complaints than compliments for sure. 

So many B&M stores have closed, shopping has changed forever so maybe QVC/HSN will survive and flourish going forward. I hope it does!

[Spurt]

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@mspatmac wrote:

If we have learned anything this year it's how fast things can change and we have no clue what it's all going to look like. To new customers everything is new to them on the Q. Some will stick around and are not jaded as many of us are on the boards. Posters are a minuscule number compared to the number of customers. Even on the boards there are core groups of posters. Many don't watch or buy anymore.  More complaints than compliments for sure. 

So many B&M stores have closed, shopping has changed forever so maybe QVC/HSN will survive and flourish going forward. I hope it does!

---

@mspatmac 

You make some excellent points that I whole heartedly agree with.....

But there's one point, we can agree to disagree. Now as my mom used to say, "it's the squeaky wheel that gets the oil"....so although there are just a small number of posters vs QVC's total customers giving feedback and suggestions here on the Forum, some of these opinions seem to matter because we have seen a few changes that were made.....

And sometimes the volume of customers participating  doesn't seem to matter to QVC:

For example the "The Customer's Choice Awards" not  all customers even vote, but these products are given a special designation and even an award.

And the same is true of "Customer Top Rated Products"....not everyone that purchased the item takes time to provide a review yet the product still gets that rating.... 

And not everyone makes a product suggestion to improve a product, yet host and vendor on air will say, "we heard from you customers so we made these changes to our product"......

Also, QVC sends out surveys to only a handfull of customers, yet these opinions matter to QVC......

[ellaphant]

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@Spurt wrote:

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@mspatmac wrote:

If we have learned anything this year it's how fast things can change and we have no clue what it's all going to look like. To new customers everything is new to them on the Q. Some will stick around and are not jaded as many of us are on the boards. Posters are a minuscule number compared to the number of customers. Even on the boards there are core groups of posters. Many don't watch or buy anymore.  More complaints than compliments for sure. 

So many B&M stores have closed, shopping has changed forever so maybe QVC/HSN will survive and flourish going forward. I hope it does!

---

@mspatmac 

You make some excellent points that I whole heartedly agree with.....

But there's one point, we can agree to disagree. Now as my mom used to say, "it's the squeaky wheel that gets the oil"....so although there are just a small number of posters vs QVC's total customers giving feedback and suggestions here on the Forum, some of these opinions seem to matter because we have seen a few changes that were made.....

And sometimes the volume of customers participating  doesn't seem to matter to QVC:

For example the "The Customer's Choice Awards" not  all customers even vote, but these products are given a special designation and even an award.

And the same is true of "Customer Top Rated Products"....not everyone that purchased the item takes time to provide a review yet the product still gets that rating.... 

And not everyone makes a product suggestion to improve a product, yet host and vendor on air will say, "we heard from you customers so we made these changes to our product"......

Also, QVC sends out surveys to only a handfull of customers, yet these opinions matter to QVC......

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 FYI, the silly "Customer Choice Awards" is a marketing ploy! Designed to engage the customer and make the chosen products seem "special" - as in,

gee, I must get that if everyone loves it. It's hilarious to me the way they are 'presented' w Jane in a gown and gushing/crying over the winners! LOL.