Qurate Retail took major impairment charges in the third quarter related to goodwill, the trade names of HSN and Zulily and recent performance, but the company still posted a loss after adjustment.
For the third quarter, Qurate Retail recorded a company net loss of $2.75 billion, or $7.21 per diluted share, versus company net earnings of $127 million, or 31 cents per diluted share, in the year-before period. Adjusted for one-time events, net loss was $29 million, or eight cents per share, versus net earnings of $123 million, or 30 cents per share, in the year-previous quarter, the company stated.
On average, analysts polled by Yahoo Finance expected Qurate Retail to post earnings per share of seven cents.
Revenue was $2.74 billion versus $3.14 billion in the year-prior quarter, Qurate Retail noted. Revenue in the QxH business, including QVC and HSN, fell 8% to $1.66 billion while QVC International revenue fell 21%, or 5% on a constant currency basis, to $554 million, Zulily revenue fell 39% to $200 million and Cornerstone revenue gained 8% to $327 million. E-commerce revenue slid 13% to $1.7 billion and was 62% of total revenue, in the period year over year over year. Operating loss was $2.61 billion versus operating income of $274 million in the year-earlier quarter.
According to Qurate Retail, QxH revenue declined primarily due to a 6% decrease in units shipped, which reflected weakened consumer sentiment due to macroeconomic factors of inflation and higher interest rates as well as a decline in shipping and handling revenue. Average selling price slipped by 2%, reflecting inventory reduction actions. Although total customer count declined, QxH experienced a 3% gain in average spend per customer and a 6% increase in items purchased per customer. QxH reported declines in all merchandise categories. Home revenues decreased by 9%, the company revealed in a conference call.
QVC International’s constant currency revenue declined 5% primarily due to lower unit volume, Qurate Retail indicated, reflecting weakened consumer sentiment driven by inflation and the war in Ukraine, as well as a decrease in shipping and handling revenue. Average selling price advanced 4% in constant currency primarily due to strength in jewelry in Japan. QVC International cited declines in home, beauty and accessories, partially offset by gains in apparel and jewelry.
Zulily revenue tumbled primarily due to lower unit volume, reflecting lesser availability of national brand product and marketing inefficiencies due to cost inflation, which caused the business to reduce marketing spend, Qurate Retail maintained. However, Cornerstone sales gained, with the business generating record third quarter revenue at each of its home brands, Frontgate, Ballard Designs and Grandin Road, primarily driven by strong demand for bath, holiday, case goods, kitchen and home furniture. A decrease in demand for apparel at Garnet Hill partially offset the advances elsewhere.
The impairment charges include those for QxH and Zulily goodwill and the HSN and Zulily trade names in addition to a significant increase in discount rates used combined with recent business performance partially attributed to challenging economic conditions, the Qurate Retail pointed out.
Aside from the war in Ukraine, extraordinary events affecting Qurate Retail in the third quarter included the death of Queen Elizabeth II in the United Kingdom and the related period of national mourning and Hurricane Ian in Florida, said David Rawlinson, president and CEO of Qurate Retail in a conference call. In addition, he said, the company dealt with excess inventory and the need to move goods “particularly at HSN,” which pressured margins. However, Rawlinson said the company had begun to push through excess inventory earlier than most other retailers and had improved inventory position.
In announcing the financial results, Rawlinson said, “An intensely promotional environment and weakened consumer sentiment impacted our third quarter performance, along with other retail players, amplified by continued downstream impacts from the December 2021 fire at our former Rocky Mount, NC, fulfillment center and our actions to move excess inventory. Despite soft results, we maintained our focus on progressing the five pillars of Project Athens, our three-year strategic plan to re-establish revenue growth, adjusted OIBDA margin expansion and incremental cash flow generation. We are augmenting our team and attracting executive leadership talent with top-tier experience who will help drive this transformation, including a chief operating officer, president of streaming operations, a chief merchandising officer for QVC US and a chief people officer.”
