A fire and inflation contributed to less-than-expected second quarter financial results at Qurate Retail, even as it undertakes a strategic turnaround initiative.
Company net income in the quarter was $203 million, or 53 cents per diluted share, versus $222 million, or 52 cents per diluted share, in the 2021 period.
Adjusted for one-time events, net income was $47 million, or 12 cents per diluted share, versus $232 million, or 54 cents per diluted share, in the year-earlier quarter.
Qurate missed a 14 cents per diluted share MarketBeat analyst consensus earnings estimate and a $297 million revenue estimate for the quarter.
Total revenue was down 16% to $2.95 billion versus the year-previous quarter, the company stated while revenue at the QXH division, including QVC and HSN operations, was down 12% to $1.75 billion, QVC International revenue was down 19% to $638 million, Zully revenue was down 45% to $220 million and Cornerstore revenue was up 4% to $341 million.
Operating revenue was down 3% to $418 million versus the year-before quarter.
Second quarter revenue decline in the main QXH business resulted primarily from a 9% year-over-year decrease in units shipped, Curate pointed out, reflecting supply chain challenges and downstream impacts from a December fire at the company’s Rocky Mount, NC, fulfillment center, weakened consumer sentiment due to inflation and a decrease in shipping and handling revenue. Average selling price slipped 3% reflecting a mix shift away from higher price point electronics merchandise. Although total customer count declined, QxH enjoyed a 5% increase in average spend per customer and an 8% increase in items purchased per customer. At the same time, QxH reported declines primarily in electronics but also in home, beauty and accessories. According to a Curate Q2 results presentation, home revenues at QXH declined 3% year over year after gaining 14% in the first quarter. Home’s share of the merchandising sales held steady year over year in the quarter at 39%.
Zulily’s Q2 revenue decreased primarily reflected supply chain constraints and marketing inefficiencies arising from cost inflation, which caused the division to reduce marketing spend, affecting customer acquisition and retention, Curate noted. Cornerstone generated record second-quarter revenue at each of its brands, primarily driven by solid growth in its home brands Frontgate, Ballard Designs and Grandin Road with strong demand for bath, case goods, kitchen and home furniture, as well as demand for apparel and home textiles at Garnet Hill.
“Our second quarter results reflected lower demand driven by similar factors impacting all of retail including inflation, the war in Ukraine and rising interest rates, as well as supply chain challenges and downstream impacts from last December’s fire at our Rocky Mount, NC fulfillment center that affected our merchandise availability and operational efficiency,” said David Rawlinson, Qurate president and CEO, in announcing the financial results.
“We have already begun implementation of our turnaround plan and are pleased to report several key developments. First, we unveiled Project Athens in June, a three-year plan to re-establish revenue stability, margin expansion and incremental free cash flow generation at Qurate Retail. Second, we augmented our executive leadership talent with the addition of a president for our streaming business and a chief merchandise officer for QVC US. We look forward to introducing these individuals soon. Third, we took action to unlock value, monetizing real estate assets to optimize our balance sheet, increase liquidity and reduce debt. Fourth, we saw early signs of stabilization and the rate of revenue decline moderated at QxH in the quarter. We are motivated and confident in our ability to deliver on Project Athens from a bolstered balance sheet position, and we look forward to reporting future progress.”
