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QG

QVC Group, Inc. (QVCGA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue declined 10% year over year to $2.105B, operating income was $14M, and Adjusted OIBDA fell 32% to $177M amid cord‑cutting headwinds and tariff volatility; segment revenues decreased across QxH (-11%), International (-6%; -4% cc), and Cornerstone (-13%) .
  • Management emphasized a strategic pivot to live social shopping, highlighting a 24/7 TikTok Shop partnership and calling social shopping “a transformative opportunity,” positioning the business to reinvent its model .
  • Liquidity and leverage remain focal: cash was $833M, the revolver had $1.85B drawn (incremental availability $863M), and QVC Inc. leverage (adjusted for Cornerstone removal) was 3.7x at quarter‑end; dividends are restricted under senior secured notes when leverage >3.5x .
  • Stock reaction catalysts include management’s stated intent to seek shareholder approval and implement a reverse stock split if needed to regain NASDAQ compliance by June, and tariff‑related demand risks that may necessitate pricing actions and vendor negotiations .

What Went Well and What Went Wrong

What Went Well

  • Strengthening of digital/social positioning: “We believe social shopping is a transformative opportunity,” supported by a first‑of‑its‑kind 24/7 TikTok Shop agreement to expand reach beyond declining linear TV .
  • Mix and returns supported product margins: management cited higher product margins driven by mix shift and favorable return rates, partially offsetting sales deleverage and fulfillment cost inflation .
  • Channel mix improved: eCommerce penetration increased at QxH to 63.4% (+120 bps) and International to 52.7% (+130 bps), while mobile share of eCommerce rose to 71.3% (+150 bps) and 76.7% (+790 bps), respectively .

What Went Wrong

  • Broad‑based revenue declines: QxH (-11%), International (-6%; -4% cc), Cornerstone (-13%), reflecting fewer units shipped and lower average selling prices alongside weaker shipping revenue .
  • Margin compression from cost inflation and deleverage: QxH Adjusted OIBDA margin fell 310 bps (12.0% to 8.9%) and International fell 140 bps (13.1% to 11.7%) on higher freight and labor costs and lower volumes .
  • Cash outflow and leverage constraints: free cash flow was a use in Q1, with payments for TV distribution rights and operations driving a cash decline; leverage >3.5x under senior secured notes restricts dividends, underscoring capital structure focus .

Financial Results

Consolidated quarterly trends

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$2.344*$2.944*$2.105
Diluted EPS - Continuing Operations ($USD)-$2.91*-$166.27*-$12.50*
EBIT Margin %6.48%*7.10%*4.04%*
EBITDA Margin %9.85%*10.26%*8.22%*
Net Income ($USD Millions)-$23*-$1,286*-$100

Values marked with * were retrieved from S&P Global.

Segment revenues

Segment Revenue ($USD Millions)Q1 2024Q1 2025YoY ChangeConstant Currency YoY
QxH$1,539 $1,368 (11%) N/A
QVC International$572 $537 (6%) (4%)
Cornerstone$231 $200 (13%) N/A
Total QVC Group$2,342 $2,105 (10%) (10%)

Segment operating income

Segment Operating Income ($USD Millions)Q1 2024Q1 2025YoY Change
QxH$94 $0 NM
QVC International$63 $29 (54%)
Cornerstone-$3 -$11 (267%)
Unallocated corporate cost-$9 -$4 56%
Total QVC Group$145 $14 (90%)

Segment Adjusted OIBDA

Segment Adjusted OIBDA ($USD Millions)Q1 2024Q1 2025YoY Change
QxH$185 $122 (34%)
QVC International$75 $63 (16%)
Cornerstone$6 -$4 NM
Unallocated corporate cost-$7 -$4 43%
Total QVC Group$259 $177 (32%)

KPIs

QxH

KPIQ1 2024Q1 2025Change
Cost of Goods Sold % of Revenue65.4% 67.5% +210 bps
Operating Income Margin (%)6.1% 0.0% -610 bps
Adjusted OIBDA Margin (%)12.0% 8.9% -310 bps
Average Selling Price (US$)$53.60 $52.63 (2%)
Units Sold——(10%)
Return Rate15.4% 15.3% -10 bps
eCommerce Revenue ($MM)$958 $867 (9%)
eCommerce % of Total Revenue62.2% 63.4% +120 bps
Mobile % of eCommerce Revenue69.8% 71.3% +150 bps
LTM Total Customers (MM)8.0 7.4 (8%)

QVC International

KPIQ1 2024Q1 2025Change
Cost of Goods Sold % of Revenue64.0% 64.8% +80 bps
Operating Income Margin (%)11.0% 5.4% -560 bps
Adjusted OIBDA Margin (%)13.1% 11.7% -140 bps
Average Selling Price——(3%) vs LY; (1%) cc
Units Sold——(4%)
Return Rate19.2% 18.3% -90 bps
eCommerce Revenue ($MM)$294 $283 (4%); (1% cc)
eCommerce % of Total Revenue51.4% 52.7% +130 bps
Mobile % of eCommerce Revenue68.8% 76.7% +790 bps
LTM Total Customers (MM)4.1 4.0 (2%)

Cornerstone

KPIQ1 2024Q1 2025Change
Cost of Goods Sold % of Revenue59.7% 57.5% -220 bps
Operating Income Margin (%)(1.3%) (5.5%) -420 bps
Adjusted OIBDA Margin (%)2.6% (2.0%) NM
eCommerce Revenue ($MM)$175 $150 (14%)
eCommerce % of Total Revenue75.8% 75.0% -80 bps

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue/EPSFY/Q1 2025Not providedNot providedMaintained no formal guidance
Adjusted OIBDA marginFY/Q1 2025Not providedNot providedMaintained no formal guidance
Free Cash FlowFY 2025Not providedQ1 FCF was a use; payments for TV distribution rights impacted cash flowInformational (no formal guidance)
Revolving Credit FacilityThrough Oct 2026Revolver maturity Oct 2026Confirmed no immediate need to renew; evaluating optionsMaintained timeline
Capital Structure/Nasdaq1H 2025Compliance period running; reverse split if neededIntends to implement reverse split post‑shareholder approval to regain compliance by JuneNew implementation detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q3 2024)Current Period (Q1 2025)Trend
Social/streaming strategyIT operating model shift and outsourcing initiated in 2Q24; non‑cash impairments at QxH in 4Q24 dominated headlines 24/7 TikTok Shop agreement; social shopping emphasized as transformative; targeting multi‑year growth in social/streaming Accelerating digital/social pivot
Supply chain/fulfillment costsOngoing efficiency efforts; restructuring began 2Q24 Higher freight rates and labor costs (Europe variable wage rates) pressured fulfillment expense Cost headwinds persist
Tariffs/macroN/ATariff volatility impacted discretionary demand; mitigation via sourcing diversification, lower POs, vendor negotiations, potential pricing actions Macro risk heightened
Customer acquisition/viewershipN/AQxH TV minutes watched down ~13%; sequential LTM customer count down; constrained new customer spend given sentiment Structural pressure from cord‑cutting
Capital structure/leverage$1.5B impairment at QxH in 4Q24; restructuring expenses Net debt cited ~$4.7B; revolver $1.85B drawn; leverage ratio 3.7x (Cornerstone excluded) Balance sheet prudence emphasized

Management Commentary

  • “We believe social shopping is a transformative opportunity and are moving quickly to be a leader here. QVC’s agreement with TikTok is a first of its kind partnership for 24/7 content creation…” — David Rawlinson, President & CEO .
  • “We are uniquely suited to bring our large‑scale, high‑volume, live social shopping experience to TikTok… Our agreement will be a catalyst to transform shopping and discovery.” — David Rawlinson II (TikTok agreement PR) .
  • “Mitigation strategies underway, including sourcing diversification, limiting purchase orders, vendor negotiations, and may include price changes.” — Management remarks .

Q&A Highlights

  • Tariffs and mitigation: Management outlined sourcing diversification, vendor negotiations, and possible price actions to offset tariffs; warned persistent tariffs would depress discretionary demand .
  • Customer acquisition and sentiment: New customer spend was deliberately reduced due to weak sentiment, contributing to declines in new and reactivated customers; linear TV minutes watched declined ~13% .
  • de minimis exemption: Ending de minimis could be a slight tailwind for QVC’s digital/social businesses versus low ASP competitors .
  • Capital structure: Revolver maturity October 2026 provides time; reverse stock split planned pending shareholder approval to regain NASDAQ compliance by June .
  • Free cash flow: Q1 FCF was a use, predominantly due to operations and TV distribution rights payments; rights payments vary by renewal cycles .

Estimates Context

  • S&P Global consensus: EPS and revenue consensus for Q1 2025 were unavailable; only actual revenue was present. As such, beat/miss analysis versus Street is not possible, and we cannot assess estimate dispersion or revision cadence [GetEstimates].
  • Implication: Given the magnitude of YoY declines and margin compression, Street models may need to reduce FY Adjusted OIBDA/margin assumptions and incorporate higher fulfillment cost inflation and tariff risk until digital/social offsets scale .

Key Takeaways for Investors

  • Near‑term, the narrative is dominated by structural cord‑cutting, tariff risk, and cost inflation; expect cautious positioning until digital/social initiatives materially offset linear declines .
  • Watch for execution on the TikTok 24/7 partnership and broader social/streaming content pipeline as leading indicators of new customer acquisition and engagement recovery .
  • Monitor leverage and liquidity: revolver draw ($1.85B), leverage ratio (3.7x), and restrictions under senior secured notes when leverage >3.5x constrain capital returns; any deleveraging catalysts could re‑rate risk .
  • Q2/Q3 trajectory: margin recovery hinges on fulfillment cost moderation, vendor negotiations, and mix/returns remaining favorable; otherwise, Adjusted OIBDA pressure could persist .
  • Corporate actions: reverse split decision and NASDAQ compliance timeline may drive trading volatility and event‑driven moves in the near term .
  • Segment focus: QxH remains the largest profit engine but most exposed to linear declines; International showed relative resilience on returns/product margins; Cornerstone softness tied to home sector demand .
  • Estimate resets likely skew negative absent signs of stabilization in unit volumes/ASP and faster digital/social ramp; model conservatively on revenue and margin for H1 while tracking cost mitigation and engagement metrics .

Additional financial context and reconciliations:

  • Adjusted OIBDA reconciliation shows $177M in Q1 2025 vs $259M in Q1 2024; restructuring costs totaled $57M in Q1 2025 ($36M QxH; $21M International) and were excluded from Adjusted OIBDA but weighed on operating income .
  • Q4 2024 included a non‑cash $1.5B impairment (goodwill/tradenames) at QxH, materially impacting GAAP losses and emphasizing the urgency of the strategic pivot .
  • Cash decreased by $72M in Q1; total debt increased by $69M primarily due to revolver borrowing to fund repayment of $585M notes maturing in February 2025 .

Values marked with * were retrieved from S&P Global.