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QVC Owner Says Q4 Port Delays Stretched to 45 Days

Shares of Qurate Retail Inc. have been slid on Friday following the company’s report of a 9.1 percent decrease in fourth quarter revenues due to supply chain constraints.

In a Nutshell: Qurate said the decline in its QxH devision combining QVC and HSN stemmed from a 6 percent decrease in units sold, mostly because of supply chain issues and product scarcity for home and electronics. The average selling price was flat for the quarter. The division saw growth in apparel and beauty. Zulily also suffered from supply constraints and marketing challenges.

Shares of Qurate were down 2.6 percent to $5.91 in trading at noontime Friday.

President and CEO David Rawlinson told Wall Street investors in a conference call that November revenue softened as consumers began their holiday shopping in October. Qurate saw “underperformance of our replacement product choices in December,” especially in home and electronics, he added.

“December’s weakness reflected ongoing supply chain constraints, and customers concluding their holiday shopping earlier than normal,” Rawlinson said.

Carriers canceled 30 percent of Trans-Pacific vessels in the quarter within days or weeks of scheduling. “Congestion at U.S. ports on the West Coast spread to the East Coast ports and to Savannah, Georgia,” he said, adding that vessels anchoring at U.S. ports were delayed by five to 45 days.

Rawlinson said a U.S. trucking capacity shortage further exacerbated shipping challenges. Qurate’s Rocky Mountain, N.C. fulfillment center erupted in flames on Dec. 18. The combination of supply chain issues, plus an earlier than normal holiday shopping period and uncertainty around Omicron and inflation suppressed demand.

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The company faced similar supply constraints and product scarcity in Europe, while Japan was less impacted by the supply challenges, Rawlinson said.

Consumer behavior hasevolved more quickly” than has the company’s business model, and while Qurate “must catch up” with new skills, talent and at a faster pace, Rawlinson said deep experience in video commerce and digital ecosystem will help it adapt. The company last year began livestreaming its shopping shows on YouTube TV. 

Net Sales: For the three months ended Dec. 31, net revenue declined 9.1 percent to $4.06 billion from $4.45 billion.

By division, QxH revenue fell 7 percent to $2.54 billion, QVC International declined by 9 percent to $813 million, and Zulily dropped 30 percent to $351 million. The bright spot was Qurate’s Cornerstone business, which saw revenues rise 8 percent to $357 million. Cornerstone includes home brands Frontgate, Ballard Designs and Grandin Road and apparel and home brand Garnet Hill.

For the year, revenue slipped 1 percent to $14.04 billion from $14.18 billion.

Earnings: The company reported a net loss of $215 million for the quarter, or 54 cents a diluted share, against net income of $666 million, or $1.56, a year ago. Adjusted earnings per share (EPS) for the quarter was 40 cents.

The company uses OIBDA (operating income before depreciation and amortization) as its standard metric to show operating performance. For the current quarter, adjusted OIBDA was $550 million, representing a 19 percent decline from adjusted OIBDA of $683 million in the year-ago period.

For the year, net income dropped 72 percent to $340 million, or 82 cents a diluted share, from net income a year ago of $1.20 billion, or $2.86.

CEO’s Take: “As a team we are focused on a turnaround of this business that will modernize the value proposition, stabilize our core flagship brands and capitalize on growth opportunities,” Rawlinson said. “In the fourth quarter, we managed through a number of continuing challenges and are not pleased with the performance. We feel confident in our ability to deliver, although we know it will take time to improve some aspects of the business and innovate.”