• QxH Revenue: Decreased 6% due to lower unit volume and shipping and handling revenue.
• Home Revenue: Decreased 3%, driven by lower demand for culinary and finished products.
• Apparel Revenue: Declined 3%, despite gains in certain brands.
• Fashion Fee Revenue: Decreased 4%, driven by lower demand for Bath & Body.
• Electronics Revenue: Decreased 16%, primarily due to weaker computer sales.
• Adjusted EBITDA Margin: Dropped by 40 basis points.
• Gross Margin: Declined 10 basis points, with higher product margins mitigated by fulfillment pressure.
• Fulfillment Expenses: Increased approximately 35 basis points due to higher wage and freight rates.
• Operating Expenses: Decreased 6% due to lower commissions.
• SG&A Expenses: Reduced by 4% but unfavorable by 35 basis points due to deleveraging of administrative costs and increased marketing expense.
• QVC International Revenue: Decreased 1%, with a 3% decrease in average selling price.
• QVC International Adjusted EBITDA: Decreased 9%, with a margin contraction of 95 basis points.
• Cornerstone Revenue: Declined 12% due to soft demand across home brands.
• Cornerstone Gross Margin: Expanded 290 basis points due to lower supply chain costs.
• Free Cash Flow: $102 million for the first nine months of 2024, compared to $79 million last year.
• Net Debt: $4.7 billion as of September 30, 2024.
• Leverage Ratio: 3.1 times, compared to a maximum covenant threshold of 4.5 times.

• Warning! GuruFocus has detected 5 Warning Signs with QRTEA.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Qurate Retail Inc (NASDAQ:QRTEA) has teamed up with celebrity chef Carla Hall and other notable figures to enhance brand building and customer engagement.
• The company experienced strong demand for certain brands and products, including leather jackets, e-bikes, and beauty devices.
• QVC's streaming business is seeing strong momentum with double-digit growth in revenue, total minutes viewed, and monthly average users.
• Qurate Retail Inc (NASDAQ:QRTEA) has implemented cost efficiencies, resulting in a more profitable and nimble organization.
• The company successfully extended its debt maturity profile by tendering 89% of its 2027 and 2028 notes for newly issued 2029 notes, improving its credit profile.

Negative Points

• Qurate Retail Inc (NASDAQ:QRTEA) reported a 6% decrease in QxH revenue due to lower unit volume and shipping and handling revenue.
• The apparel business experienced lower sales, and electronics sales decreased by 16%, primarily due to weaker computer sales.
• QVC International's adjusted EBITDA declined due to higher fulfillment costs and lower product margins.
• Cornerstone's revenue declined by 12% due to low demand and challenges in the housing sector.
• The company is facing challenges from cord-cutting, impacting its traditional viewership and necessitating a shift to new platforms.

Q & A Highlights

Q: Do you expect the categories that have remained soft to continue being soft, and are you taking actions to change your programming to focus on stronger categories? A: Gregory Maffei, Executive Chairman, explained that the category performance was impacted by macro factors and events, leading to a broad category impact. They are monitoring categories closely and adjusting airtime to focus on stronger categories. However, the quarter's performance was more about macroeconomic conditions than specific category dynamics.

Q: How are tariffs affecting your sourcing, and how did you manage tariffs in the past? A: Gregory Maffei noted that most tariffs are managed on a landed cost basis with vendors. In the past, they diversified sourcing away from China to mitigate tariff impacts. They continue to evaluate and adjust sourcing strategies as needed.

Q: Did the macro events in October affect trends similarly to the third quarter? A: David Rawlinson, President and CEO, stated that macro events like debates and the Olympics had a direct impact on viewership and sales. The third quarter was influenced by media cycles, but they saw some improvement as the quarter progressed.

Q: Can you provide insights into international market performance, particularly in Japan and Germany? A: Gregory Maffei reported that revenues in Germany and Japan were stable, with growth in home and electronics but softness in fashion. Shipping challenges in Europe affected performance, but overall, the international business remains stable.

Q: With the election behind us, do you expect viewership to normalize in the fourth quarter, and what are your holiday plans? A: Gregory Maffei anticipates a more normalized viewership in the fourth quarter. They have strong holiday programming planned, including exclusive events and celebrity appearances, and expect improved performance due to higher seasonal volume.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.