This is an interesting turn of events: Qurate Retail is no longer breaking out separate financial figures, such as sales, for QVC and HSN. And the nets have a new honcho.
Qurate, parent of the two top home shopping networks, reported its second-quarter earnings Thursday. And it only broke out info for QxH, its goofy name for the umbrella company that runs and oversees the two channels. So we don’t know, at least from the 2Q press release, how QVC did versus HSN, just the combined data for QxH.
So QxH saw its revenue dip 1%, from $1.9 billion to $1.874 billion, in the second quarter compared with the year-ago quarter.
QxH reported sales declines in apparel and jewelry, which were partially offset by gains primarily in accessories and electronics, according to Qurate’s press release.
Operating income margin contracted and adjusted OIBDA margin was flat, reflecting gross margin pressure mainly from higher fulfillment (freight and warehouse) expense, which was partially offset by higher product margins, if you can make any sense of that.
QxH also incurred higher bad debt and marketing expense, according to its parent. These factors were offset by lower TV distribution commissions and customer service expense.
Lower TV distribution commissions were due in part to the accounting treatment for certain renewed HSN carriage agreements, as well as renegotiated rates at HSN and growth in off-air sales. Operating income included higher amortization expense related to HSN carriage agreements.
Beginning in the third quarter last year, HSN began renewing TV carriage agreements with several distributors — meaning cable and satellite companies — which provided multiyear upfront payments that are amortized over the life of the agreements, versus its previous convention of expensing quarterly payments as incurred. This accounting change has a positive impact on QxH’s adjusted OIBDA with a corresponding increase in QxH’s amortization expense, which is neutral to operating income each period and cash neutral over the life of the agreements.
That’s too much accounting mumbo-jumbo for us, but maybe you can make sense of it.
And here’s the exciting statement from Qurate President and CEO Mike George.
“We made good strategic and operational progress, evidenced by the sequential improvement in revenue and adjusted OIBDA margin at QxH and the double-digit, year-over-year adjusted OIBDA growth at QVC International in constant currency,” George said.
“These gains were partially offset by deterioration at Zulily. We are encouraged by the resiliency of our businesses and our ability to generate high levels of adjusted OIBDA and free cash flow in a dynamic and highly competitive environment. We resumed share buybacks, repurchasing nearly 12 million shares at an average price per share of $12.88 following our last earnings call. Going forward, we remain focused on building on the collective strengths of QVC and HSN, realizing synergies and stabilizing Zulily.”
Qurate also said that it had appointed Leslie Ferraro, a former Walt Disney Co. executive, as president, QxH, effective Sept. 16.
Homeshoppingista's Blog By Linda Moss 