QVC owner’s inventory bloat not as bad as industry average – Sourcing Journal
Revenue fell 13% to Retail business Inc. in the third quarter.
In a word: The QVC, HSN and the owner of Zulily coupé debt 9% at the end of the third quarter to $5.91 billion, compared to $6.47 billion in the second quarter. The West Chester, Pa.-based company ended the third quarter with $624 million in cash, up 11% from $561 million a year earlier. The $443 million raised from the sale of five properties helped the company pay off some of its debt. Qurate also received insurance payouts for a distribution center fire in North Carolina nearly a year ago.
Acting Chief Financial Officer James Hathaway told investors on a conference call that the company had $2.7 billion on its gun, which he described as “ample cushion.”
The company said it was making progress on the turnaround of Project Athena, which focused on improving customer experience, improving execution, reducing costs, optimizing the brand portfolio and building high-growth companies.
The company has hired Scott Barnhart as COO, Soumya Sriraman as president of streaming, Stacey Bowe as director of merchandising and Linda Aiello as director of human resources to fuel its transformation.
Weakening consumer confidence didn’t help Qurate’s third-quarter sales, nor did the death of Queen Elizabeth, which took $10 million in UK sales from Qurate’s coffers. company, said Qurate President and CEO David Rawlinson. Then there’s the $3-5 million lost by QVC when it switched to prerecorded programming for four days during Hurricane Ian.
Promotions also squeezed margins in the third quarter as Qurate struggled to break free inventory which has accumulated due to supply chain backlogs and the North Carolina fire.
“We expect inventory offset actions to create margin pressure at least through the end of 2022,” Rawlinson said. He expects “some hangover” in the first quarter, although the company is expected to manage most of the excess inventory before January.
“If you look at the NPD data, some other industry data, that suggests the market has risen about 20% in excess of stock in retail. We’re down about 5 percent. So we’re going into that area much cleaner than the overall retail environment, and we think we’ll continue to improve that number in the fourth quarter,” Rawlinson said.
Mother-child company Zulilly signed “a few hundred new brands of various types, including 15 to 20 national brands,” which should drive conversion and support revenue, according to Rawlinson.
Executive Chairman Greg Maffei said the company is trying to reduce inventory to free up working capital and cash flow. European sale-leaseback transactions are also expected to unlock approximately $170 million in gross proceeds at current exchange rates.
Net sales: Total revenue for the third quarter ended Sept. 30 fell 13% to $2.74 billion from $3.14 billion. Qurate said its online sales fell 13% to $1.7 billion.
Recipes for QxH, i.e. QVC and HSN, slid 8% to $1.66 billion from $1.81 billion in the United States. QVC International’s revenue fell 21% to $554 million from $699 million. Zulily’s revenue fell 39% to $200 million from $328 million. Sales in the Cornerstone business comprising Frontgate, Grandin Road and Garnet Hill increased 8% to $327 million from $304 million.
Most promotions and sales focused on home inventory, with some targeting fashion products such as loungewear. Quarterly home sales fell 9%, while apparel fell 2% against growth of 8% in the same quarter a year earlier. Contemporary clothing underperformed, Hathaway said. Additionally, accessories fell 10% due to lower demand for handbags, luggage, underwear, and casual and athletic footwear.
Earnings: Qurate posted an operating loss of $2.61 billion on an operating profit of $274 million a year ago.
By line of business, QxH posted an operating loss of $2.25 billion compared to an operating profit of $219 million a year ago. QVC International reported a 46% drop in operating profit to $52 million from $97 million. Zulily widened its operating loss to $403 million from a loss of $40 million, while Cornerstone’s operating profit fell 88% to $2 million from $16 million a year ago. year.
On an adjusted OIBDA, or operating profit before depreciation and amortization, total operating profit fell 57% to $185 million from $432 million in the year-ago quarter.
Opinion of the CEO: “We made progress in the third quarter, moving from the evaluation phase of [our three-year strategic plan Project] Athens has extensive planning. We expect to start seeing deep execution and bottom line impact in 2023,” Rawlinson said.