QVC in the United States had a great holiday season, with revenue up 13 percent in the fourth quarter and 2 percent for last year, its parent Liberty Media reported Thursday.
“QVC’s management team did an extraordinary job and delivered impressive results,” Liberty Media president and CEO Greg Maffei said in a prepared statement.
In the fourth quarter QVC’s domestic sales increased 13 percent to $1.7 billion and 2 percent for the year to $5.0 billion. Adjusted OIBDA increased 32 percent to $371 million in the fourth quarter and 4 percent for the year to $1.1 billion. For the quarter and the year, the mix of products shifted from the jewelry and apparel product areas to home and, to a lesser extent, the accessories product areas.
“QVC’s fourth quarter results are outstanding,” QVC president and CEO Mike George said in a press release. “We grew revenue and profitability at one of the highest rates in the last decade and are showing improving trends in all markets…In the fourth quarter we debuted our Isaac Mizrahi lifestyle brand along with several other leading brands and designers, and experienced the most successful Black Friday event in QVC history.”
The average selling price for the fourth quarter increased 4 percent from $48.33 to $50.37 with the total number of units sold increasing 6 percent to 35.2 million from 33.2 million. For the year, the average selling price increased 2 percent from $47.94 to $49.01 and the total number of units sold declined 3 percent to 108.7 million from 112.5 million.
Returns as a percent of domestic sales decreased to 16 percent from 18 percent for the fourth quarter and to 18 percent from 19 percent for the year due to the sales mix moving from jewelry and apparel to home products, which typically have a lower return rate.
QVC.com sales as a percentage of domestic sales increased from 28 percent to 31 percent for the quarter and from 25 percent to 29 percent for the year.
The domestic adjusted OIBDA margin increased 306 basis points to 22 percent for the quarter and remained relatively consistent at 22 percent for the year. The increase for the quarter was primarily due to a higher gross margin percentage resulting from more efficient warehouse operations and freight savings as well as favorable customer service expenses and the leverage of fixed costs.
QVC’s consolidated revenue, which includes its international home shopping channels, increased 14 percent in the fourth quarter to $2.4 billion and 1 percent to $7.4 billion for the year. Adjusted OIBDA increased 27 percent to $530 million in the fourth quarter and 4 percent to $1.6 billion for the year, while operating income increased 40 percent and 7 percent, respectively.
“The fourth quarter was the first quarter since Q1 of 2008 when every country posted positive revenue growth in local currency,” George said. “We are also encouraged that our results show a balanced performance, with strong gains in top and bottom line results indicative that growth is due to both compelling, exclusive content as well as aggressive cost management.”
QVC’s international revenue increased 15 percent iin the fourth quarter to $751 million from $655 million, including the impact of favorable exchange rates in the United Kingdom, Germany and Japan. For the year, international revenue remained flat at $2.4 billion despite the unfavorable foreign currency exchange rates in the United Kingdom and Germany and including favorable exchange rates in Japan.
QVC intends to launch its television programming in Italy in the fourth quarter. Included in the international adjusted OIBDA results for the fourth quarter and the year ended Dec. 31 are $2 million and $5 million, respectively, of costs related to the expected launch of the QVC Italy service.
“QVC’s global market position will be further strengthened in 2010 with the launch of QVC Italy and the implementation of our technology makeover including our global eCommerce platform, customer relationship and call center management platform and our multi-media infrastructure,” George said.
Excluding the effect of exchange rates, international revenue increased 6 percent in the UK, 8 percent in Germany and 4 percent in Japan in the fourth quarter and increased 2 percent in the UK, 3 percent in Germany and 1 percent in Japan for the year.
International adjusted OIBDA increased 19 percent to $159 million in the fourth quarter and 4 percent to $451 million for the year. International adjusted OIBDA margins increased 70 basis points for the quarter and 80 basis points for the year due primarily to favorable gross margins.
The fourth quarter gross margin increased due primarily to favorable warehouse operations across each market and a reduction in realized inventory foreign exchange losses, particularly in the UK. The gross margin increased for the year due primarily to lower warehouse costs and a favorable obsolescence provision across each market.
Excluding the impact of exchange rates, QVC’s international adjusted OIBDA increased 10 percent in the fourth quarter and 5 percent for the year.
QVC UK’s revenue increased 6 percent and 2 percent in local currency in the fourth quarter and for the year, respectively. The UK’s average selling price in local currency increased 1 percent for the fourth quarter and 4 percent for the year and units sold increased 4 percent for the fourth quarter but declined 2 percent for the year.
QVC UK experienced a higher gross margin in the fourth quarter and the year due primarily to a favorable obsolescence provision, lower warehouse expenses and a reduction in realized inventory foreign exchange losses.
QVC Germany’s revenue grew 8 percent and 3 percent in local currency in the fourth quarter and for the year, respectively. QVC Germany’s average selling price in local currency increased 3 percent for the fourth quarter and 4 percent for the year and units sold increased 5 percent for the fourth quarter but declined 1 percent for the year.
QVC Germany experienced a lower gross margin in an effort to move less productive inventory and an unfavorable obsolescence provision, partially offset by favorable warehouse costs. For the year, Germany’s gross margin increased due to a favorable obsolescence provision and warehouse costs partially offset by a lower product margin.
QVC Japan’s revenue rose 4 percent and 1 percent in local currency in the fourth quarter and for the year, respectively. QVC Japan achieved growth of 17 percent in units sold for the quarter and 9 percent for the year with the average selling price in local currency declining 12 percent and 7 percent for the fourth quarter and year, respectively.
For the fourth quarter, Japan experienced sales growth in accessories, apparel and health and beauty categories and declines in sales of jewelry and home products. For the year, Japan experienced sales growth in the accessories, apparel and jewelry categories and declines in sales of home, health and beauty products.