QVC’s Third-Quarter Sales Drop 6 Percent

Home shopping networks took a beating in the third quarter, with QVC seeing its revenue dive 6 percent, to $1.3 billion, just a day after HSN reported that its sales had slid.

The news about QVC, the dominant domestic shopping channel, was not surprising in at least one respect: Company honcho Mike George had warned in the second quarter that there revenue had slowed down and might take a tumble in the coming period.

HSN also had a rough go. Net sales for the third quarter were $569.7 million, a decrease of 3.5 percent from the prior year.

“The U.S. experienced declines in the electronics, beauty, jewelry and accessories categories, which were partially offset by gains in home and apparel,” QVC’s parent, Liberty Interactive Corp., said in a press release on Tuesday.

“eCommerce revenue increased 1 percent to $684 million and grew 342 basis points to 51 percent of total U.S. revenue,” the release said. “Operating income decreased 18 percent to $175 million, operating income margin declined 199 basis points, adjusted OIBDA decreased 8 percent to $308 million and adjusted OIBDA margin declined 43 basis points.”

Consolidated revenue for the QVC Group, which includes its domestic and international networks, was down 3 percent to $1.9 billion.

“We are benefiting from our diversified global model,” QVC President and CEO George said in a canned statement.

“While we are facing sales pressures in our U.S. business, we delivered local currency sales gains in every non-U.S. market in the quarter. We are responding to the immediate domestic challenges through a series of strategies to drive more balanced growth across our categories, consistently deliver exceptional customer experiences, offer outstanding values, accelerate new customer acquisition, and lower operating costs.”

He added, “And last week we were thrilled to launch Beauty iQ, the first multi-platform shopping network dedicated exclusively to beauty. These actions demonstrate our confidence in the long-term health of our unique retail model.”
QVC has now centralized many of its corporate functions in Poland, creating the network calls its “ONE Q organizational structure.

The goal is to “better leverage its global scale and capabilities, to enhance its competitive position and to create operational efficiencies,” the press release said.

Then it went on with this gobble-gook to explain the financial impact of this change. Maybe you can make heads or tails of it, cause we sure can’t.

Beginning in the first quarter of 2016, QVC began allocating certain corporate costs for management reporting purposes differently. Historically, QVC allocated these costs to the market from which the services were provided.

Now, as more of QVC’s costs support initiatives in multiple markets, QVC is allocating costs to the markets that will benefit from the expenditures. These management cost allocations are related to certain functions, such as merchandising, commerce platforms, information technology, human resources, legal, finance, brand and communications, corporate development and administration.

The cost allocations (from QVC U.S. to QVC International) totaled approximately $8 million in the third quarter and are expected to approximate $32 million in 2016.

As a result of the allocations, the US segment’s operating income and adjusted OIBDA margins were each positively impacted 60 basis points and the international segment’s operating income and adjusted OIBDA margins were negatively impacted 131 basis points in the third quarter.

There was no impact to consolidated operating income and adjusted OIBDA margins. With the completion of the ONE Q implementation, QVC’s financial disclosure is consistent with the way it evaluates its business performance and manages its operations.

Regarding domestic QVC, “The third quarter included the aforementioned cost allocations from ONE Q, which were mostly offset by approximately $7 million of severance expense. The results primarily reflect lower product margins and higher warehouse costs, which were partially offset by favorable inventory obsolescence and lower bonus and benefit expenses of approximately $10 and $8 million, respectively, and higher credit card income.”

Also for QVC domestic, the average selling price per unit (“ASP”) decreased 7 percent to $54.75, units sold decreased 1 percent, and returns as a percentage of gross product revenue improved 170 basis points.

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6 Responses to “QVC’s Third-Quarter Sales Drop 6 Percent”

  1. Chas Says:

    Mikey, Mikey, Mikey – Sales down, never ever saw this and by a huge amount. Who are going to blame for this Mikey boy, nobody left, you fired them all. Maybe you can ask your staff in Poland. I’ll give you a hint, it’s not the products, it’s not external factors, it’s YOU and guess what you ain’t and never have been a credible leader. You took a first class company and you trashed it. Fired devoted and dedicated employees who will suffer and scrape to make a living now why you count your millions. Customers know this and we stopped buying. We buy from companies that have values, you have none and you are toast.

  2. SUSAN Says:

    QVC continues to show the same LIMITED 15 products over and over and over again, the TSV presentations have several presentations during the same show, and some of the hosts are downright annoying—no wonder their sales continue to decline…..QVC has no clue!!! No wonder customers are watching and buying less from them…..

  3. Chas Says:

    Do you wonder why a guy like Trump won last night. Right it is because of greedy CEO’s like Mike George who makes millions and then lays off dedicated employees in their peak earning years and transfer their jobs to Poland. I despise Trump but I hope he goes after QVC and guys like George.

  4. Pete Says:

    Excellent points Chas, Idiots like George are the main reason we have lost jobs in the USA. I intend to write President Trump repeatedly and hopefully he will single out QVC and George as one of the chief criminals behind the loss of American jobs. Guys like him make me sick

  5. Carolyn Simpson Says:

    everyone has said it correctly. I cannot believe what has happened to this network. boring hosts, stale products, and the Poland move. real turnoff people

  6. Chas Says:

    For any fortunate one that still has a job in West Chester I would appreciate if you would send President elect Trump a picture of the rows of empty cubicles and offices that Mike George created by eliminating jobs and sending them to Poland. God Bless those families this Thanksgiving, may you be fortunate to find employment with a company that has values and respects America. Until then give thanks by giving your money to charity and certainly not to QVC

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