Promotions, Customer Count Drop Dent Qurate's Q3 Results
Qurate Retail enters the holiday shopping season facing numerous challenges as the parent company of QVC and HSN reported a drop in sales for the third quarter.
For the three month period ending Sept. 30, company-wide revenue was $2.74 billion, a decrease of 13% when compared to the same quarter the previous year. The retailer reported operating loss of $2.6 billion, compared to operating income of $274 million in the third quarter of 2021.
The operating loss was the result of non-cash tradename impairments in the amounts of $180 million for QxH (related to HSN) and $140 million for Zulily. Additionally, 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.
“An intensely promotional environment and weakened consumer sentiment impacted our third quarter performance, along with other retail players, amplified by continued downstream impacts from the December 2021 fire at our former Rocky Mount, NC fulfillment center and our actions to move excess inventory,” said David Rawlinson II, president and CEO of Qurate Retail, Inc.
Also having a negative impact on sales is the sharp decline in customer count. For the 12 month period ended in September, the company reported 9.263 million active customers, a drop from its customer count of 11.130 million active customers over the 12 month period ended September of 2021.
Despite the company reporting a sixth consecutive quarter of revenue declines, Rawlinson said Qurate maintained its focus on progressing the five pillars of Project Athens, a three-year strategic plan to re-establish revenue growth, adjusted OIBDA, margin expansion, and incremental cash flow generation.
“We are augmenting our team and attracting executive leadership talent with top tier experience who will help drive this transformation, including a chief operating officer, president of streaming operations, a chief merchandising officer for QVC US and a chief people officer,” he said.
By division, Zulily (-39%) and QVC International (-21%) reported the largest percentage drop in revenue, while Cornerstore had an 8% increase in revenue. By product category, jewelry (-23%), electronics (-11%), beauty (-10%), and accessories (-11%) saw the largest decreases.
On July 15, QVC, Inc. 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 leaseback transactions will be approximately $33 million.