QVC, HSN See Sales Slide 4% In the Fourth Quarter

Last week Qurate Retail Group, the parent of both QVC and HSN, reported that revenue for the two channels dropped 4% in the fourth quarter and 5% last year.

The two dominant home shopping networks are part of Qurate’s QxH division. Revenue in the fourth quarter was $2.16 billion.

Here’s what Qurate said in its press release about QVC and HSN:

QxH revenue declined in the fourth quarter and full year. Revenue declined in both periods primarily due to lower units shipped, which decreased 5% in the fourth quarter and 6% in the full year, as well as lower shipping and handling revenue and higher returns.

Units shipped in the fourth quarter were impacted by less inventory liquidation sales compared to the prior year. These factors were partially offset by a 3% increase in average selling price in both the fourth quarter and full year. QxH grew apparel and jewelry with declines in electronics and home in the fourth quarter. QxH reported declines in all categories for the full year.

Operating loss in the fourth quarter was primarily driven by a $326 million non-cash impairment charge related to goodwill. For the full year, operating income increased due to the $2.7 billion non-cash impairment charge related to goodwill and the HSN tradename recorded in the prior year.

For the fourth quarter and full year 2023, Adjusted OIBDA margin(4) increased mainly due to higher product margins, lower fulfillment (warehouse and freight) costs and favorable inventory obsolescence expense.

Product margins increased primarily due to mix shift to higher-margin products, fewer clearance items as a result of improved inventory health and initiatives to increase initial margin. Fulfillment favorability was driven by efficiencies from Project Athens initiatives, significantly lower detention and demurrage costs and improved freight rates from the new parcel carrier contract that took effect in July 2023. Inventory obsolescence declined due to an improved inventory assortment. These gains were partially offset by unfavorable administrative expenses in both periods, with expenses for the full year primarily related to outside services for Project Athens.

And here is what the top honcho had to say:

“2023 was a transformational year for Qurate Retail,” David Rawlinson, President and CEO of Qurate, said in a statement. “We executed better on multiple fronts including merchandising, pricing strategy and inventory management, and these efforts yielded significant, positive results in the operational health and financial performance of the business. We increased free cash flow generation, reduced substantial debt and optimized our portfolio with the divesture of Zulily, and in the fourth quarter, we grew Adjusted OIBDA by over 70% as reported. As we enter 2024, we expect to continue our momentum and drive improved results.”

Here is the slide presentation that Qurate had for its investors:

https://d1io3yog0oux5.cloudfront.net/_efda8a953d44e23d2aaf22d86081bbd7/qurateretail/db/880/8068/earnings_presentation/QRTE+Q4-23+Earnings+Slides_v2.pdf

QVC, HSN Parent Names Successor To Mike George

We won’t have Mike George to kick around for very long soon.

Qurate Retail, owner of QVC and HSN, on Tuesday announced that David Rawlinson II will assume the role of president and CEO effective Oct. 1. He will succeed George after a two-month transition period, beginning Aug. 1, during which time Rawlinson will serve as president and CEO-elect.

Prior to joining NielsenIQ as CEO, Rawlinson was president of Grainger Global Online, where he led the fastest growth, stand-alone division of W.W. Grainger Inc. , a Fortune 500 firm. Under his leadership “the business grew double digits every year and won multiple national awards for workplace culture,” Qurate said in its press release.

Rawlinson has also held executive roles with ITT Exelis, formerly ITT Corp. He also served a Presidential appointment as a White House Fellow and held various appointed positions in both the Bush and Obama administrations.

In the Obama Administration, he was a senior adviser for economic policy with the White House National Economic Council. He has an MBA from Harvard Business School, a JD from the University of South Carolina School of Law and is a graduate of The Citadel, a tough-ass military school.

Impressive.

From Oct. 1 until his retirement at year-end, George will serve as a senior adviser to Qurate to assist in transitional matters. Effective Jan. 1 next year, and concurrently with George’s retirement from Qurate’s board, Rawlinson will join the board. Qurate had announced in November 2020 that George would be retiring from the company at the end of this year.

“We are pleased to welcome David Rawlinson to the Qurate family. David brings an impressive track record of success, most recently with two storied brands, Nielsen and Grainger,” Greg Maffei, Qurate Executive Chairman, said in a statement.

“At these companies, David was a transformational leader and successfully managed the businesses through evolutionary transitions,” Maffei said. “His knowledge of global e-commerce, understanding of consumer trends and focus on mission and culture as a purpose-driven leader make him a natural fit for Qurate Retail.”

And here are Rawlinson’s words of wisdom.

“Qurate Retail operates as a unique and powerful enterprise. The world of shopping has been forever changed by the pandemic and these brands have the international scale, customer affinity, and expertise in driving and meeting demand across multiple platforms to define the future of experiential retail.”

“QVC and HSN pioneered home shopping and are now set to define a new world of seamless shopping. Zulily, Ballard Designs, Frontgate, Garnet Hill and Grandin Road are all focused and modern brands with passionate customers and unique value propositions. Together, Qurate Retail is in a strong position to drive value for our customers, shareholders, communities, and employees. I look forward to working with the exceptional team at Qurate Retail and I am grateful to Mike for being such a capable and values-driven leader for the company.”

QVC Laid Off 450 Employees in July Blood Bath

Praise be. It looks like QVC and HSN combined had a decent second quarter financially. Oh, and they laid off 450 employees, including some of our favorite hosts.

Revenue for QxH, which is the two home shopping channels combined, increased 7% to $2 billion compared with the year-ago period, Qurate Retail Group reported this week.

Buried in the press release, however, were the first solid numbers about how many people QVC pink-slipped last month, including folks like host Antonella Nestor. We’ve blogged about the layoffs but didn’t have a confirmed number on the total.

Qurate said it “took a variety of actions to simplify and streamline its operating structure as it accelerated its strategic plan and incorporated key operational learnings from its COVID response.”

So what did it do?

“This necessitated separating with approximately 450 team members in July, incurring $20 million of severance costs in the second quarter,” the heartless company said. “Qurate Retail also closed QVC customer contact centers in San Antonio, Texas, and Chesapeake, Virginia, and the Zulily customer contact center and digital studio in Gahanna, Ohio, as the businesses shifted to permanent work from home positions in those locations.”

There you have it.

Here’s what else Qurate’s fearless leader had to say.

“We generated strong growth in revenue, OIBDA, and free cash flow in the second quarter, with every business unit and geographic market achieving meaningful sales gains and significant new customer additions,” Qurate President and CEO Mike George said in a canned statement.

“Our agile teams responded to the ongoing shifts in consumer needs during this challenging time to deliver engaging and relevant experiences across our e-commerce, video and social platforms,” he said.

“While economic uncertainty remains, our recent results give us confidence that we can generate sustained growth by continued execution of our strategies to offer unique differentiated products and immersive and trusted shopping experiences across all the digital platforms relevant to today’s consumer, while keeping the health and well-being of our team members and communities our top priority.”

The parent company also addressed workplace changes stemming from the pandemic.

“Team members who can work from home will continue to do so, until at least early 2021, with some working from home permanently,” Qurate said. “Social distancing, mandatory mask requirements and stringent safety and sanitation protocols are in effect at all sites. Qurate Retail provided special pay and work from home allowances and continues to provide leave, medical and other benefits.”

QxH, which again is QVC and HSN, reported revenue growth in the home, electronics and beauty categories, which were partially offset by declines in apparel and jewelry.

Product margins decreased primarily due to category mix shifts and pricing and promotional offers early in the second quarter.

Gross margin decreased primarily due to higher fulfillment (warehouse and freight) costs mainly associated with COVID-related premium pay in its fulfillment centers, lower productivity due to COVID-related protocols, reduced pack factor and general freight rate increases.

These factors were partially offset by favorable customer returns.

Operating income and adjusted OIBDA margin were also impacted by $9 million of incremental severance expense, higher marketing expense and incentive compensation accruals, partially offset by favorable TV commissions.

Integrated QVC-HSN, Dubbed QXH, Means 2,000 Layoffs

When QVC’s parent company acquired HSN last year, everyone knew it would mean massive changes and eventually, massive layoffs. Well, that other shoe dropped Wednesday. We’re still not sure where “Miracle Mop” creator Joy Mangano ends up in all of this.

Here is the lengthy press release:

http://ir.qurateretail.com/news-releases/news-release-details/qurate-retail-group-announces-initiatives-deliver-long-term

So no, the QVC and HSN TV networks will not be merged into one. But they will be placed under one business unit, called QXH. Catchy, huh?

The new unit was part of Qurate Retail Group’s announcement about a massive restructuring that calls for integrating not only QVC and HSN’s fulfillment centers but also its buying organizations.

The end result? Some 2,000 people will be out of jobs, about 350 coming mainly from HSN’s HQ in St. Petersburg, Fla., which will remain open, and the rest from three fulfillment centers that Qurate will be closing.

The company also plans to lease space in a new warehouse facility, a honking 1- million-square-foot logistics center in Bethlehem, Penn. There will be 1,200 to 1,500 new jobs there, if you are looking for a silver lining.

Here’s the send-off that Mike George, Qurate president and CEO, gave to workers losing their jobs, including some folks who apparently had worked at the home shopping networks for 25 years.

“Today’s initiatives are the next step in our ongoing review of how to best continue the integration of HSN and QVC,” George said in a statement.

“With a focus on driving digital transformation, these efforts will extend our leadership in social, digital, and video commerce. I want to thank the many dedicated team members who will be impacted by these changes. Their commitment to HSN, QVC, and our customers, in some cases spanning 25 years or more, has been instrumental to our success. Our excitement today over the positive impact of these changes is tempered by the loss of many valued team members.”

The consolidation will result in streamlining that “will ensure an aligned approach to the U.S. market and better leverage the combined scale and resources of the two organizations, while still maintaining the unique identity of each brand and the St. Petersburg, Fla., campus for HSN,” Qurate said in its press release.

“The QXH name reflects the continued importance of the QVC and HSN brands, the multiplying power of bringing these brands together to maximize performance in the US market, and the engaging customer experiences we will offer across our five HSN, QVC, and Beauty iQ networks and digital properties,” George said.

OK, know we get it: QVC times HSN = QXH.

There will no be only one buying team for HSN and QVC, which to us seems it will make it hard to keep distinct identities for each network.

“HSN and QVC US buying organizations are being combined and structured around seven strategic category groups: Apparel, Accessories and Jewelry, Beauty, Kitchen Electronics and Cookware, Home Innovations, Home Style, and Consumer Electronics,” Qurate’s press release said. “Category leaders will be responsible for developing and driving strategies to maximize growth in the US market, across both the QVC and HSN platforms.”

The release goes on, “This integrated buying organization is expected to provide several benefits, including: increased speed to market with the best brands, products, ideas and entrepreneurs; optimized product assortments across QXH’s five US networks and multiple web and social platforms to maximize customer choice; a more aggressive pursuit of white space opportunities; and better alignment with our vendor partners.”

As for merging fulfillment operations, Qurate said it will be far more efficient and mean we customers will get our packages sooner. Right now Qurate operates four HSN and five QVC fulfillment centers, with many of them dedicated to specific categories, such as hard goods or apparel.

Over the next three to four years Qurate plans to combine HSN and QVC fulfillment centers so that they carry “the full product assortments” of both brands, in order to combine shipments to the customer and lower operating expenses.

“Once completed, the integrated fulfillment network is expected to: increase average delivery speeds to customers by two days; enable more items to be consolidated into single shipments to improve customer convenience; and deliver significant savings in freight and fixed costs,” Qurate said.

The press release also has possible ominous news about Ingenious Designs, inventor Joy Mangano’s company, which is part of HSN and home to the Miracle Mop and Huggable Hangers.

“HSN is closing its Ingenious Designs facility in Long Island, NY, shifting the design and sourcing of those product lines to QRG’s (Qurate’s) in-house design and sourcing team,” the parent company said.

Does that mean that Mangano is losing her own design team, and control of her company? Will she be staying on-board?

There are a couple of winners in this QVC-HSN scenario.

Mary Campbell, chief merchandising officer for Qurate and chief commerce officer for QVC U.S., will be responsible for QXH merchandising, marketing, brand and digital strategy and the QVC U.S. digital, content and broadcast operations. She will have primary responsibility for the development and growth of the QVC brand.

HSN President Mike Fitzharris who will be responsible for QXH video platform expansion and distribution and the HSN digital, content and broadcast operations. He will have primary responsibility for the development and growth of the HSN brand and oversight of the St. Petersburg campus.

They will both report to George.

QVC U.S. President Steve Hofmann is being kicked to the curb. His position is being eliminated, and his last day is Friday.

To sum up, some of us were surprised to see veteran QVC jewelry vendor Judith Ripka appear on HSN a few days ago. Expect to see a lot more of that QVC-HSN crossovers.

As someone who has been laid off twice, with the first time more devastating than we could ever explain to you, we certainly feel for those who are getting pink slips. But we lost our jobs during the Great Recession, the worse economic period since the Great Depression.

The U.S. economy is booming now, with unemployment at record lows, so we know you HSN and QVC folks will find new jobs a lot faster than we did. We wish you the best.