QVC’s 4Q Revenue Drops 7 Percent, To $1.9 Billion

The end of last year was tough going for home shopping networks.

On Tuesday QVC’s parent released fourth-quarter earnings, and the channel saw a dip in its sales, just like its rival HSN recently reported.

QVC’s U.S. revenue dropped 7 percent, to $1.9 billion in the fourth quarter and 2 percent, to $6.1 billion, in 2016, according to Liberty Interactive Corp.

“Internationally, QVC continues to perform well, while domestically we are focusing on strengthening a few merchandise categories that have been weak,” Liberty Interactive President and CEO Greg Maffei said in a canned statement.

HSN just had similar bad news to report. Its net sales dipped 1 percent, to $769.3 million, in the fourth quarter versus the prior year. In 2016, HSN’s sales were down 3 percent, to $2.5 billion.

QVC’s top honcho Mike George had a lot of ‘splaining to do. And he did.

“Our international segment generated strong results in the quarter with broad-based sales gains and margin expansion,” George said. “The sales trend in our U.S. business persisted from the third quarter primarily due to continued headwinds in select categories. We have strong action plans in place and are confident in our ability to return the US business to growth.”

“In 2016, we continued to significantly advance our digital platforms. eCommerce and mobile penetration grew approximately 260 and 800 basis points, respectively,” he said. “As we begin 2017, we are serving a large, engaged customer base, and we are creating competitive advantages as we further extend our reach across digital and next generation commerce platforms. We will leverage these strengths to build on our highly differentiated shopping experience.”

In the quarter, QVC’s average selling price per unit (“ASP”) decreased 8 percent to $56.78, units sold increased 1 percent, and returns as a percentage of gross product revenue improved 32 basis points. The U.S. experienced year-over-year declines in all categories except apparel.

For the year, ASP decreased 6 percent to $57, units sold increased 2 percent, and returns as a percentage of gross product revenue improved 104 basis points. Domestic QVC experienced year-over-year declines in jewelry, electronics and beauty, which were partially offset by gains in apparel, home and accessories.

E-commerce revenue decreased 1 percent to $1.1 billion and grew 326 basis points to 56 percent of total U.S. revenue in the quarter. For the year, e-commerce revenue increased 4 percent to $3.2 billion and rose 328 basis points to 52 percent of total U.S. revenue.

In the quarter, operating income decreased 15 percent to $303 million, operating income margin declined 143 basis points, adjusted OIBDA decreased 9 percent to $438 million and adjusted OIBDA margin declined 43 basis points, including the aforementioned cost allocations.

Excluding the cost allocations, adjusted OIBDA decreased 10 percent to $431 million and adjusted OIBDA margin declined about 80 basis points, primarily due to higher freight and warehouse expenses and lack of sales leverage.

For the year, operating income decreased 6 percent to $915 million, operating income margin declined 58 basis points, adjusted OIBDA decreased 2 percent to $1.4 billion and adjusted OIBDA margin was flat, including the aforementioned cost allocations.

Excluding the cost allocations, adjusted OIBDA decreased 4 percent to $1.4 billion and adjusted OIBDA margin decreased roughly 50 basis points, primarily due to lower product margins and higher bad debt, freight and warehouse expenses, which were partially offset by lower personnel expenses and favorable inventory obsolescence.

Beginning in the first quarter of 2016, QVC began allocating certain corporate costs for management reporting purposes differently, Liberty Interactive said in its press release.

Historically, QVC allocated these costs to the market from which the services were provided. 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 about $7 million in the fourth quarter and $31 million for 2016. As a result of the allocations, the U.S. segment’s operating income and adjusted OIBDA margins were each positively impacted approximately 35 basis points in the quarter and 50 basis points for the full year.

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7 Responses to “QVC’s 4Q Revenue Drops 7 Percent, To $1.9 Billion”

  1. Tom Says:

    Mr. Mike, Mr. Mike who are you going to blame now, lousy results yet again…smooth talker has the plans… can’t fire more long term employees, they are all gone, tired merchandising. Could it be the CEO never had a clue and ran this company into the ground.

  2. Mammaberti Says:

    Not sure who shops qvc anymore. Beauty stuff Sephora or Ulta better deals. Susan Graver too expensive when you can pretty much buy the same stuff at Kohls and not watch that crazy acting woman try to model everything. The Goldstein stuff is just ugly and expensive. She does the same goofy top over and over again. Denim & Co fairly practical but also over priced. Not sure what gives with them. Very bad management and not current with the times. Lots of online shopping with no shipping either way.

  3. SUSAN Says:

    It’s called OVERKILL and OVERSATURATION QVC!!! You show the SAME 15 limited products over and over and over again!!!! Too many beauty shows (surprise surprise your beauty sales were down in recent report)…..so what does Q do….create Beauty IQ …..and you spread the same products to QVC Plus!!! QVC thinks they solve the problem by creating new show titles with new show hosts thinking this is “new” to keep their customer engaged, but it’s just a cover up because the SAME merchandise is shown on all these so-called “new” shows!!!!

    QVC will never learn is what customers want is more variety and more UNIQUE merchandise than other what we can find easily in local stores……Their clothing prices are uncompetitive….I can find better bargains at Dillards, Macy’s Stein Mart, JCP, Kohls of equivalent quality!!! Other retailers offer free returns including the return of your original shipping!!! Adding more categories to online viewing isn’t going to draw in viewers to watch oversaturated products!!!

    Many of the hosts are downright annoying and these are the hosts that seem to get many spot lighted shows in prime time….and all that does is scare more customers away!!!

    QVC needs a whole new management team with REAL knowledge in retail and a real refreshing of their products and programming and change your prime times hosts! Better wake up QVC because it can easily go downhill from here and ending in the retail graveyard!

  4. Julie Says:

    Tom, Mammaberti, and Susan

    All 3 of you are so totally right. I’ll take it 1 step more and add HSN as well…and Evine. The other points you make are excellent, but to Mammaberti’s point, costs are way too high. Better quality stuff at Target and Walmart for a fraction of the price. Kohl’s quality blows the channels away completely. You can order online, from all 3 stores, with free shipping after an amount is spent….typically around $50. And frequently there are special promotions with free shipping.
    Long gone are the days when home shopping brought in good deals on unique, not found elsewhere items. They are big ripoffs today.

  5. SUSAN Says:

    @JULIE And HSN partnering with these Hollywood movies and these HSN tie in and promotions has been nothing but flops….Really HSN placing your products prominently in Lifetime movies who came up with that????????????…..These gimmicks certainly did not impact HSN’s revenue in a positive way! I will say at least I get coupons in the mail and email from HSN…..all you get with QVC is Easy Pay these days but that doesn’t bring down the actual price!

  6. Tom Says:

    Check out 60 minutes … laid off QVC workers forced to train Polish workers to replace them by Mike George who makes millions… still want to buy from QVC…

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