Home Shopping Network QVC’s Revenue Increased 7 Percent, To $1.2 Billion, In Third Quarter

QVC’s domestic revenue rose 7 percent in the third quarter, to $1.2 billion, as its product mix continued to show steady growth in accessories, apparel and home and a decline in jewelry sales, the home shopping network’s parent reported Friday.

“We continue to leverage our programming assets through the launch of second channels in both Germany and the UK and the iPad app in the US,” QVC president and CEO Mike George said in a prepared statement. “Our pop-up store and studio in Rockefeller Center for Fashion’s Night Out generated positive press attention but more importantly engaged our customers through our live broadcasts, Facebook, Twitter, YouTube and QVC.com.”

Earlier in the week HSN posted a 6 percent gain in third-quarter sales.

QVC’s domestic adjusted OIBDA increased 8 percent to $261 million compared to the third quarter 2009, according to its parent, John Malone’s Liberty Media Corp. The average selling price increased 2 percent from $47.52 to $48.30 while total units sold increased 5 percent to 26.2 million.

Returns as a percent of gross product revenue decreased from 19.3 percent to 18.8 percent. QVC.com sales as a percentage of omestic sales grew from 28 percent in the third quarter last year to 31 percent this year.

The domestic adjusted OIBDA margin increased 22 basis points to 22.4 percent for the quarter primarily due to a lower inventory obsolescence provision as well as more efficient customer service operations partially offset by increased fixed costs primarily due to the non-recurrence of favorable franchise and sales tax audit settlements recorded in the prior-year period.

Overall, the domestic adjusted OIBDA results were negatively impacted by $5 million due to QVC’s new credit card agreement with GE Money Bank, which was effective Aug. 2. QVC entered into a new agreement with GE Money Bank, who provides revolving credit directly to QVC customers solely for the purchase of merchandise from QVC. Under the new agreement QVC receives a portion of the economics from the credit card program according to percentages that vary with the performance of the portfolio.

QVC also recovered its noninterest bearing cash deposit maintained in connection with the prior arrangement in the amount of $501 million. During the third quarter, QVC entered into a new bank credit agreement which provides for a $2 billion revolving credit facility and reduced bank borrowings by $745 million, lowering QVC’s leverage ratio below 2:1.

QVC’s consolidated revenue, which includes domestic and international sales, increased 7 percent in the third quarter to $1.8 billion; adjusted OIBDA increased 8 percent to $369 million and operating income increased 13 percent to $235 million.

“Every QVC market generated strong revenue growth in local currency, increased adjusted OIBDA margins and attracted more new customers in the third quarter,” George said. “Our consolidated adjusted OIBDA margin, excluding our start-up operations related to Italy and the negative impact of our new QCard arrangement, improved 105 basis points from a strong adjusted OIBDA margin last year. QVC expanded its global footprint through the successful launch of QVC Italy on October 1st.”

QVC’s international revenue increased 6 percent in the third quarter to $604 million from $569 million including the impact of unfavorable exchange rates in the United Kingdom and Germany and favorable exchange rates in Japan.

International adjusted OIBDA increased 9 percetn to $108 million and adjusted OIBDA margin increased 48 basis points for the quarter. The increase in the adjusted OIBDA margin was primarily due to the increased gross product margin in Germany, partially offset by $9 million of costs related to the Oct. 1 launch of QVC Italy service.

Excluding the effect of exchange rates, QVC’s international revenue and adjusted OIBDA both grew 8 percent. International djusted OIBDA increased 17 percent, excluding the effect of exchange rates and start up costs related to QVC Italy.

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