Archive for August, 2018

QVC Second-Quarter Sales Up 4 Percent, HSN Down

August 12, 2018

It was a tale of two home shopping networks in the second quarter, with QVC seeing sales rise 4 percent and HSN seeing an 11 percent drop. Both are under the same ownership now, part of Qurate Retail Inc.

QVC’s revenue rose to $1.43 billion, from $1.37 billion a year ago. HSN saw sales of $473 million, down from $533 million in the prior-year quarter.

There were some bookkeeping changes, so Qurate added many caveats in its second-quarter earnings report, such as, “QVC US revenue (was) up 4 percent as reported, up 2 percent on a comparative basis excluding impact of new accounting standards regarding credit card income.

You can see for yourselves:

“We continued our sales growth at QVC and the strong momentum at zulily, as well as initial profit improvement at HSN as we implement our operating strategies,” Mike George, Qurate Retail’s president and CEO, said in a canned statement.

“We are showing solid early execution on strategic priorities to expand and engage our customer base across platforms and achieve attractive operating synergies,” he said. “Qurate realized strong growth in its total customer count, led by zulily and QVC, and significantly grew customer engagement as we increased exposure on emerging video and social platforms and continued to strengthen our performance marketing capabilities. Qurate Retail’s unique position at the intersection of key trends in retail, together with our operational execution, will set a strong foundation to drive sustainable growth and long term value creation.”

QVC saw year-over-year sales gains in apparel and accessories, which were partially offset by declines in home, beauty, electronics and jewelry, according to the second-quarter press release.

In the second quarter, HSN’s sales mix shifted to home, accessories and beauty from apparel, jewelry and electronics, the release said. Return rates improved due to the sales mix shift toward product categories with lower return rates and a continued positive trend in several categories. The decline in operating income margin is primarily due to purchase accounting amortization.

Here’s some of the accounting stuff that we can’t make heads nor tails of.
tQuaraye Retail adopted the new U.S. accounting standard regarding revenue recognition (ASC 606) as of January 1, 2018. Accordingly, QVC, HSN and zulily recognize credit card income for their branded credit cards as part of net revenue rather than as an offset to SG&A expense.

This change will positively impact Qurate Retail’s revenue for 2018. Qurate Retail is providing comparable results in addition to GAAP results where applicable and the narrative in this press release is presented excluding the impact of this accounting adjustment. The zulily-branded credit card was first implemented in the third quarter of 2017 and this change did not have a material impact on zulily’s reported revenue in the second quarter of 2018.

In addition, under new revenue recognition standards, Qurate Retail now recognizes revenue at the time of shipment as opposed to delivery. This accounting change had a modestly negative impact on reported results for Qurate Retail in the second quarter, but this impact is expected to balance out over 2018. As such, comparable results presented in this press release are not adjusted for this change. HSNi previously recognized revenue at the time of shipment, so there is no impact to HSNi’s reported results.

In the wake of acquiring HSN, Qurate Retail saw $8 million in cost synergies in the second quarter, of which about “$6 million benefited operating income and adjusted OIBDA and the remaining $2 million relate to equity compensation expense.”
Qurate Retail remains on track to achieve $35 million to $40 million of cost synergies this year, according to the press release