Here is part of what David Rawlinson, President and CEO of Qurate Retail — parent of QVC and HSN — said on a third-quarter earnings call last week.
Our takeaway:
- Today’s Special Value now back to being limited to 24 hours.
- There were more layoffs.
- “Over 50 and Fablulous” a success?
- Hosts have been “re-engaged.”
Some edited excerpts from the CEO:
We expanded product margins by refreshing our merchandise assortment with higher quality products, rotating into higher-performing categories and higher price point subcategories and affecting strategic price increases.
We reinvigorated our core daily programming, the Today’s Special Value at QVC and Today’s Special at HSN with elevated merchandise assortment, enhanced programming, events and re-engaged hosts. We have also returned these specials to time limited 24-hour event, reinfusing a sense of urgency. From these efforts, we beat expectations on per minute productivity and overall TSV or TS performance at both QVC and HSN.
We effected workforce reductions throughout the company. While these were difficult decisions, they are right for the long-term health of the business. And lastly, we conducted a deep dive customer analysis and have enacted changes that are beginning to stabilize the customer file. We expect these foundational improvements and Project Athens work streams to continue to drive progress.
Now, let me discuss each of our three businesses. QXH [QVC and HSN] increased OIBDA 41%, driven by 480 basis points of gross margin improvement. From a top line perspective, QXH moderated the rate of decline in Q3 with Q3 down 3% compared to mid-high single-digit declines in the first half of 2023. Our total sales outperformed the discretionary retail market. We achieved a better balance between unit volume and average selling price.
Unit volume declined 3% and which was an improvement from the high single-digit decline in the first half of 2023, largely a function of higher quality product assortment. We continue to drive higher pricing primarily through our merchandise mix with average selling price up 1% in Q3.
From an operational perspective, QXH continues to lower cost and improve delivery times. Rates from our new domestic parcel contract took effect in late July and our operational cost per unit declined 12% in Q3. Our order to delivery time declined 2%. Our refresh merchandise assortment and enhanced programming are contributing to this improving revenue performance. In terms of viewership, minutes viewed on our five linear channels increased 15% year-over-year in Q3.
The number of new own items grew low-double digits in Q3 and which were met with strong consumer demand. QVC continues to enhance its programming for its core customer. Earlier this year, I told you about a limited-run series, “Over 50 and Fabulous.” We broadcast Season 2 of the series for six weeks from mid-August to late September. We enhanced strategies from Season 1 and improved the shows sales per minute productivity.
To date, there are more than 26.5 million views of “Over 50 and Fabulous” across social and digital platforms. For the series finale, we hosted customers for an in studio live show an after-party live stream. Tickets for that event sold out in five minutes. Looking at the category performance in the third quarter; QXH saw a turnaround in the home category, driven by fresher products, exciting events and inspiring personalities.
We experienced year-over-year growth in demand during our Christmas in July event at QVC as well as at HSN during its July birthday month. Food and kitchen gadgets were particularly strong as we leaned on our celebrity chefs like David Venable and Wolfgang Puck, proprietary brands such as Kitchen HQ and specialty events and programming, such as our foody Travel series and Moody Fest.
Home decor demand improved, driven by seasonal products, candles, storage and a 30th anniversary event with Valerie Parr Hill. QVC U.S. continues to have strength in its wellness and supplements product offering. At HSN, the relaunch of Joy Mangano has drawn a number of our reactivated customers back to the platform. In fashion, we experienced growth in accessories, led by higher demand for footwear and loungewear, including loafers, wellness footwear and brands like Barefoot Dreams.
In September, QVC refreshed as Monday night fashion line-up featuring Logo by Lori Goldstein, the relaunch of “PM Style” … and new shows “Accessorized with Shawn” and “Shawn on Style.” Each show was developed to deliver a strong fashion point of view and include special sets and fresh production elements.
At HSN, we were pleased to launch new brands and offers including C. Wonder by Christian Siriano, Birkenstock for the first time as a today’s special Sharp flexstile hair tool and Sofia Vergara’s Toti beauty line. Now, let me touch on QX customers. On a quarterly basis, total count declined 8% in the third quarter, partially offset by a 6% increase and average spend per customer, resulting in an overall 3% decline in revenue. The rate of declining count moderated in Q3 from the low double-digit declines in the first twoquarters of 2023.
We’re seeing the biggest churn from the low end of our customer file. On Slide 8 of our earnings presentation, you can see we are stabilizing the trailing 12-month count near $8.2 million, down only modestly from $8.3 million at the end of the second quarter. Please note that while our press release discloses customer count on a trailing 12-month basis, this is a lag-on indicator and does not reflect the progress in Q3.
The increase in average spend was driven by our existing and best customers and reflects our higher quality product assortment. The average dollar spend for each of these cohorts was the highest of any quarter in 2023. We are taking a variety of actions to attract new customers, retain customers and reactivate former customers.
We have launched new programs and formats on both linear and digital forms. We have offered gifts and vouchers and have refined and enhanced our marketing spend, both of which have yielded high returns. We have created new on-site experiences to have letters from the business presidents to recognize and appreciate our best customers and we are testing a pilot loyalty program.
As a result of these efforts, we’re pleased to report that new customers grew 8% at QXH in Q3 which was the first quarter of growth since Q1 2021. This growth was primarily attributed to strategic targeting of promotions based on marketing channel and product categories. We are constantly reviewing our customer acquisition costs and carefully managing overall return on our marketing efforts.
We shift marketing spend to capitalize on opportunities in the market where we can efficiently acquire customers in our target demographic and track their lifetime value. We will continue to test, learn and scale initiatives. We are executing with more success at a faster pace now than a year ago and I look forward to telling you more on future calls.
Before closing on QXH, let me provide a view on the important holiday season. Our customers are looking forward to activities with friends and family and more importantly, ready for holiday shopping. Our target customer is mindful of our budget and cognizant of inflation, particularly for groceries and gas. Therefore, it is important for us to incite and inspire her with fresh products and compelling value.
From a merchandise point of view, we feel good about our assortment and are in a substantially better inventory position than one year ago. At QVC, we are excited about several brand extensions and limited time collections from key brands. These include Susan Graver, Kim Gravel, Dennis Basso and Denim & Co.
We have new product launches, including Laurence Zaria and a new private label cashmere sweater collection from Pure Splinter. We are extending our shaft family with new culinary lines … and a cookware line from Carlyle. In beauty, we have exclusive holiday packages from key brands. These include philosophy … Peter Thomas Roth and more. In addition, QVC is the exclusive retailer for Beekmans launch in November of its Toll House partnership.
A customer selecting the perfect item on an Internet shopping platforms with a mobile device in hand.
HSM will also inspire with new merchandise, including an exclusive widely Dolly Parton for the launch of our new rock album; Catherine McPhee’s Radiance by Absolute collaboration. Aaron Andrew’s license sports launch with Vanadis and the launch of Tarte Beauty as of today’s special. We’ll also have all our celebrity chefs cooking their holiday favorites and celebrity designers bringing new and exciting assortments.