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Qurate Retail Posts Mixed Q4 Results; Completes HSN Restructuring

Qurate Retail Inc. posted mixed Q4 results, but the parent company of  shopping channels QVC and HSN also saw 2018 as the year of strong customer growth at QVC’s U.S. operations.

In a Nutshell: Michael George, president and chief executive officer, said 2018 was “highlighted by the strongest new customer growth at QVC U.S. in its 33-year history and continued gains in digital and mobile engagement. He also noted that results for the year were “led by top-line growth at QVC U.S. and International, excellent performance from Zulily, and significantly improved second-half results at HSN as we execute on its turnaround.” Qurate Retail also completed an intercompany restructuring on Dec. 31, in which HSN and its subsidiaries became subsidiaries of QVC, Inc. It said the restructuring was to better facilitate cross-platform initiatives across the QVC and HSN businesses.

Sales: Qurate said revenues grew 1 percent for the three months ended Dec. 31, to $4.38 billion from $4.33 billion. By segment, e-commerce revenue was $2.7 billion, or 64 percent of total revenue for the quarter. QVC U.S. saw a revenue increase of 3 percent in the quarter, while QVC International saw revenues declining by 3 percent. The HSN business posted a 1 percent decline in revenue for the quarter. Qurate’s Zulily revenues rose 6 percent for the three-months period, due in part to “strong customer acquisition.” It’s Cornerstone Brands business saw revenues fall 4 percent. Cornerstone includes its Frontgate, Grandin Road, Garnet Hill and Ballard Designs businesses. The division also shut down its Improvements catalog business in December 2018.

The company said QVC U.S.’s sales were primarily in electronics, apparel and accessories for the quarter, offset in part by declines in the home category. The international component saw declines in accessories and apparel, but partially offset by gains in beauty. HSN saw sales declines in electronics and jewelry, which were partially offset by gains in accessories, beauty and apparel.

Earnings: Net income for the quarter was $273 million, or 61 cents per diluted share, versus net income of $887 million a year ago, or $2.05. On an adjusted basis, diluted EPS was 62 cents.

Wall Street was expecting adjusted EPS of 73 cents on revenues of $4.4 billion. The company’s $4.38 billion in revenues, when rounded up, essentially met Wall Street’s estimates.

CEO’s Take: “Margin improvement is a top priority in 2019, as we step up the realization of integration synergies and seek to execute on initiatives to improve product margin and optimize our marketing investments,” George said.