Qurate Retail Inc., the parent of QVC and HSN, reported Wednesday that revenue for the two home shopping networks dipped 4% in the first quarter, sliding to $1.79 billion, versus the same year-ago period.
“We remain open for business thanks to the dedication and resilience of our 25,000 team members, and we are seeing encouraging increases in sales and new customers at the start of the second quarter,” Mike George, Qurate president and CEO, said in a canned statement.
“We experienced significant margin impact from COVID-19 in the first quarter and challenges remain, including a demand shift to lower-margin products and reduced productivity in our fulfillment centers,” he said. “We continue to assess what this new normal will be. At the same time, we have moved quickly to lean into favorable early second quarter trends, and we will continue to utilize our agile business model to adjust our consumer offerings.”
QxH, the unit that includes QVC and HSN, reported revenue declines in all categories in the first quarter. In mid-March, when COVID-19 awareness escalated in the U.S., QxH experienced accelerated declines in sales combined with a shift from higher-margin fashion products to lower-margin home products, Qurate said.
In late March, QxH began to see positive sales and new customer growth as it adjusted its merchandising, programming and marketing to meet customers’ changing needs.
Product margins were essentially flat in the quarter, reflecting gains through February, mostly offset by reductions in March due to COVID-19 related product mix shifts, according to Qurate.
Gross margins decreased primarily due to higher fulfillment (warehouse and freight) expenses driven by the network optimization initiatives, general freight rate increases and incremental costs related to COVID-19.
Here’s information that Qurate provided for its investors:
https://ir.qurateretail.com/static-files/ffe056b9-1ef7-4e37-a3e7-44a7a1e770a4
Qurate also detailed its responses to the coronavirus pandemic.
They were:
• Focused on the safety and financial well-being of team members. Qurate Retail shifted all team members who could work from home to do so temporarily; team members unable to work remote could choose to stay home with partial pay options; increased safety and sanitation protocols at fulfillment centers and live studios; established an Emergency Assistance Fund for one-time grants to team members most impacted by the pandemic; and offered alternative work arrangements where possible when team members must manage unexpected pressures.
• Closed retail stores to the public in March while broadcast studios and fulfillment centers remain open.
• Rapidly adjusted product offerings, merchandising, marketing, and on-air and online programming. Meaningfully improved sales and new customer growth trends across business segments beginning late March in response to changes.
• Incurred additional costs impacting margins, including appreciation and emergency pay for onsite team members (recently extended through May 31); relaxation of productivity requirements in fulfillment centers primarily driven by enforcing social distancing; enhanced sanitation protocols; and increased reserves for potentially higher bad debt rates and customer returns.
• Reduced planned spending, including an anticipated $30 million to $50 million reduction in capital spend in 2020; reduced discretionary expenses and hiring where possible.
• Supported several COVID-19 relief programs, including donating airtime for public service announcements; creating a Small Business Spotlight program across TV, streaming and digital commerce channels to benefit vendors and small retailers; supporting global PPE-making efforts of a community of more than one million artisans; donating to relief programs globally, including Meals on Wheels and No Kid Hungry in the US, the Red Cross in Germany, and the National Emergency Trust in the UK; and creating customer- and team-member matching opportunities.