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Qurate Retail, Inc. (QRTEA)·Q2 2024 Earnings Summary

Executive Summary

  • Qurate Retail Q2 2024 delivered revenue of $2.407B, down 9% year-over-year and +3% sequentially, with operating income of $165M and net income attributable to shareholders of $20M; Adjusted OIBDA rose 4% to $282M, marking a fourth consecutive quarter of growth .
  • Gross margin expanded for the fifth straight quarter, driven by higher product margins and lower fulfillment/administrative expenses; eCommerce penetration continued to rise at both QxH and QVC International .
  • Segment performance: QxH revenue -4% with Adjusted OIBDA +5%; QVC International revenue -5% in USD (flat in constant currency) with Adjusted OIBDA flat; Cornerstone -14% revenue with lower margins amid home sector softness .
  • Balance sheet: cash increased $108M QoQ to $1.210B; total Qurate Retail, Inc. debt (GAAP) declined $152M QoQ to $5.339B; QVC’s bank revolver balance fell $70M, but leverage rose to 3.1x under the revolver definition due to add-back changes .
  • No formal quantitative guidance issued; management emphasized margin initiatives (Project Athens), merchandising improvements, and the “Age of Possibility” campaign as strategic catalysts .

What Went Well and What Went Wrong

What Went Well

  • Adjusted OIBDA increased for the fourth consecutive quarter to $282M; CEO: “we expanded gross margins for the fifth consecutive quarter, generated $165 million in operating income, grew Adjusted OIBDA for the fourth consecutive quarter and reduced net debt” .
  • Mix and pricing actions improved product margins, while fulfillment and administrative costs declined, supporting margin expansion across QxH and QVC International .
  • Digital momentum: eCommerce as % of total revenue rose 280 bps at QxH (62.9%) and 340 bps at QVC International (52.1%); mobile share of eCommerce rose 190 bps and 590 bps respectively .

What Went Wrong

  • Top-line pressure persisted: consolidated revenue -9% YoY; QxH units shipped -5% and QVC International saw higher returns and lower ASP (constant currency) .
  • Operating income down sharply YoY to $165M from $366M, lapping a prior-year $209M net insurance gain; QxH operating income fell to $106M from $303M .
  • Cornerstone continued to struggle amid home sector softness (revenue -14%, Adjusted OIBDA -24%), deleveraging SG&A despite some supply chain cost relief .

Financial Results

Consolidated P&L (Reported)

Metric (USD)Q2 2023Q1 2024Q2 2024
Revenue ($USD Billions)$2.649 $2.342 $2.407
Operating Income ($USD Millions)$366 $145 $165
Net Income Attributable to QRTEA Shareholders ($USD Millions)$107 $(1) $20
Adjusted OIBDA ($USD Millions)$270 $259 $282
GAAP EPS (Diluted)$0.28 $0.00 Not disclosed in press release

Notes: EPS comparisons use company schedules where available; Q2 2024 press release did not disclose diluted EPS .

Segment Revenue and Profit

SegmentQ2 2023 Revenue ($MM)Q2 2024 Revenue ($MM)Q2 2023 Operating Income ($MM)Q2 2024 Operating Income ($MM)Q2 2023 Adjusted OIBDA ($MM)Q2 2024 Adjusted OIBDA ($MM)
QxH$1,618 $1,558 $303 $106 $185 $194
QVC International$606 $576 $71 $57 $77 $77
Cornerstone$316 $273 $15 $11 $25 $19
Total (ex-Zulily)$2,540 $2,407 $380 $165 $280 $282
Zulily$109 — $(14) — $(10) —
Total As Reported$2,649 $2,407 $366 $165 $270 $282

Supplemental KPIs

KPIQ2 2023Q2 2024
QxH Cost of Goods Sold % of Revenue66.2% 64.6%
QxH Adjusted OIBDA Margin %11.4% 12.5%
QxH Average Selling Price$51.29 $52.51
QxH eCommerce % of Total Revenue60.1% 62.9%
QxH Mobile % of eCommerce Revenue68.7% 70.6%
QxH LTM Total Customers (MM)8.3 7.9
QVC Intl Adjusted OIBDA Margin %12.7% 13.4%
QVC Intl eCommerce % of Total Revenue48.7% 52.1%
QVC Intl Mobile % of eCommerce Revenue70.2% 76.1%
QVC Intl eCommerce Revenue ($MM)$295 $300

Balance Sheet and Liquidity (Quarter-End)

Metric ($USD Millions unless noted)3/31/20246/30/2024
Cash and Cash Equivalents$1,102 $1,210
QVC Senior Secured Notes$3,086 $3,086
QVC Bank Credit Facility$1,295 $1,225
Total Qurate Retail Group Debt$4,381 $4,311
Corporate Level Debentures$1,572 $1,571
Total Qurate Retail, Inc. Debt (Face)$5,953 $5,882
Total Qurate Retail, Inc. Debt (GAAP)$5,491 $5,339
Preferred Stock (8% coupon)$1,272 $1,272
QVC Leverage (credit facility)2.5x 3.1x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company RevenueFY/Q3Not providedNot providedMaintained (no formal guidance)
Margins (Adjusted OIBDA)FY/Q3Not providedFocus on continued gross margin expansion and cost control (qualitative)Maintained qualitative focus
Leverage/Capital StructureFY 2024N/ARevolver reduction by $70M in Q2; leverage ratio 3.1x at Q2-endUpdate (operational actions)

No explicit quantitative guidance ranges were issued in the Q2 2024 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Margin expansion via mix/pricing and cost efficienciesQ4: Product margin gains, lower fulfillment costs from carrier contract; Q1: continued cost control, Project Athens efficiencies Fifth consecutive quarter of gross margin expansion; higher product margins, lower fulfillment/admin costs; some higher marketing for Age of Possibility Improving margins; tactical marketing spend up
Digital/eCommerce penetrationQ4: eCommerce % rising across regions QxH eCommerce 62.9% (+280 bps); QVC Intl 52.1% (+340 bps); mobile mix higher Structural shift to digital/mobile
Macro and category demandQ4: home/apparel softness; inventory health improved QxH declines in beauty, apparel/accessories; jewelry growth; Intl flat CC with mixed category trends Demand mixed; jewelry relative strength
Restructuring/IT operating model shiftPrior: workforce actions; sale-leasebacks QxH $10M and Intl $8M restructuring charges for IT model shift One-time costs to enable model change
Capital structure, leverageQ4/Q1: debt reduction, revolver usage, leverage at 2.4–2.5x Revolver down $70M; leverage 3.1x; compliant with covenants Focused on deleveraging; leverage ticked up on add-back changes

Management Commentary

  • CEO: “We delivered a solid quarter of earnings in a continued challenged macro environment…we expanded gross margins for the fifth consecutive quarter, generated $165 million in operating income, grew Adjusted OIBDA for the fourth consecutive quarter and reduced net debt” .
  • On strategic focus: “enhancing our merchandise assortment, improving product margins and diligently managing costs…excited about…better serving our core customer of women over fifty as part of the QVC Age of Possibility campaign” .
  • Liquidity and covenants: Qurate “is in compliance with all debt covenants” as of June 30, 2024; QVC revolver had $1.2B drawn with $1.9B incremental availability .

Q&A Highlights

  • Consumer and category mix: Management described consumer trends as mixed, with relative strength in jewelry and ongoing pressure in discretionary categories; remarks noted the challenge of macro events on viewership and demand .
  • Cost and freight: Team continues to monitor freight costs and potential disruptions; focus remains on reducing costs and managing capital structure (call commentary) .
  • Strategic initiatives: Emphasis on merchandising improvements and social/streaming engagement to offset linear viewership pressures (call commentary) .

Estimates Context

  • S&P Global consensus estimates for Q2 2024 were unavailable for QRTEA due to missing mapping in CIQ; therefore, beats/misses versus S&P consensus cannot be presented. Note: Consensus via S&P Global unavailable.
  • Actuals: Revenue $2.407B and operating income $165M as reported; adjusted OIBDA $282M .

Key Takeaways for Investors

  • Margin momentum is intact: product mix/pricing and cost actions are lifting profitability even as revenue declines; watch for sustainability of gross margin gains amid category headwinds .
  • Digital mix shift supports engagement: rising eCommerce and mobile penetration suggest multi-channel strategy traction; focus on conversion and retention as LTM customers declined modestly .
  • Balance sheet actions continue: revolver reduction and higher cash bolster flexibility, though leverage uptick to 3.1x warrants continued monitoring; covenant compliance affirmed .
  • Segment divergence: QxH shows Adjusted OIBDA improvement despite sales pressure; International stable in constant currency; Cornerstone remains macro-sensitive to housing .
  • Near-term trading: Stock likely reacts to margin resilience and debt reduction vs continued revenue softness; absence of formal guidance shifts focus to execution on Project Athens and Age of Possibility .
  • Medium-term thesis: Execution on merchandising, digital/social expansion, and cost transformation is key to stabilizing top-line and expanding margins; deleveraging path remains a critical catalyst .
  • Monitor one-time items: Restructuring charges and prior-year insurance gains complicate YoY compares; adjust models accordingly to isolate underlying OIBDA trajectory .

Appendix: Prior Quarter References and Relevant Press Releases

  • Q1 2024: Revenue $2.342B; operating income $145M; Adjusted OIBDA $259M; GAAP diluted EPS $0.00; continued margin progress from mix and lower fulfillment/admin costs .
  • Q4 2023: Revenue $3.143B; Adjusted OIBDA $340M; strong margin performance with product mix and supply chain cost improvements; deleveraging actions highlighted .
  • Press releases supporting strategic initiatives:
    • QVC “Age of Possibility” campaign launch targeting women 50+ (Q50 ambassadors, content/programming) .
    • Launch of “The Big Dish” FAST channel on The Roku Channel, expanding culinary-focused vCommerce reach .