QVC Sales Up 3 Percent, HSN Down 9 Percent in 1Q

The owner of QVC and HSN now has a new name, Qurate Retail Inc., and the company reported first-quarter earnings last week. The bottom line on the bottom line is that QVC was up, and HSN was down.

QVC saw its revenue rise 3 percent, to $1.417 billion from $1.37 billion year-over year.

Not so good at HSN, where revenue dove 9 percent, to $509 million from $562 million. Guess Mindy Grossman made her exit to Weight Watchers and Oprah Winfrey just in time.

“We are pleased to continue our positive revenue performance at QVC and zulily,” Qurate President and CEO Mike George said in a statement.

“QVC US revenue grew revenue for the third consecutive quarter and QVC International continued its track record of growth,” he said. “ In addition, QVC and zulily posted solid new customer acquisition in the quarter, and QVC continued to extend its reach to developing platforms like Roku and Facebook Live and grow customer engagement. While HSN and Cornerstone results remain challenged, we are confident in our ability to turn around both businesses.”

QVC US realized year-over-year sales gains in all categories, except jewelry and electronics in the quarter. Operating income margin expansion reflects lower amortization as a result of the roll-off of purchase accounting amortization from Qurate Retail’s acquisition of QVC.

Qurate adopted new accounting standards in the quarter, and as a result QVC US has classified about $26 million of revenue from its private-label credit card program in net revenue for the three months ended March 31. Excluding the impact of this accounting adjustment, QVC US revenue grew 2 percent in the first quarter.

Here the sad news on HSN from the 1Q press release:

Although HSN’s results are only included in Qurate Retail’s results beginning Jan. 1, 2018, we believe a discussion of HSN’s stand-alone results compared to the prior year period promotes a better understanding of the overall results of its business.

HSN has reclassified certain costs between line items to conform with Qurate Retail’s reporting for ease of comparability for the periods presented.

In the first quarter, HSN revenue declined in all categories, except beauty.
Average selling price declined primarily driven by a product mix shift away from electronics, which typically carry higher price points. Return rate improved due to a continued positive trend in several categories.

The decline in operating income margin is primarily due to purchase accounting amortization and transaction related costs. Adjusted OIBDA margin declined primarily due to higher inbound and outbound shipping costs and deleveraging of fixed costs due to the decrease in net revenue, offset by higher product margins, lower personnel expenses driven by integration-related synergies and lower bad debt expense.

As a result of Qurate Retail’s adoption of ASC 606 (new accounting standards), HSN has classified approximately $4 million of revenue from its private-label credit card program in net revenue for the three months ended March 31, 2018.
Excluding the impact of this accounting adjustment, HSN revenue declined 10% in the first quarter of 2018.

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