Qurate Retail is cutting 400 jobs this year as part of the Project Athens turnaround plan it revealed last summer.
In a Nutshell: Though Qurate president and CEO David Rawlinson told investors the company is making progress in stabilizing the business, a Rocky Mount, N.C. fulfillment center fire and slowing consumer demand are just some of the speed bumps it’s faced recently. Six sale-and-leaseback transactions and inventory improvement strengthened the QVC and HSN parents. balance sheet.
“Project Athens is key to our strategy. It represents a path to better customer relationships, operating discipline, cost control, margin expansion and streaming growth over the 2023 to 2024 period,” Rawlinson said on a fourth-quarter earnings call. “Our efforts in 2023 [are] mainly focused on cost savings and gross margin initiatives, which will impact financial results more materially in the back half of the year, and reached full impact in 2024. We expect revenue initiatives will be implemented, and impact results more significantly in 2024, and beyond.”
Addressing the 400 jobs cuts at QVC US and HSN affecting 12 percent of Qurate’s corporate staff and saving $60 million this year and beyond, “We know rebalancing our workforce is right for our business going forward,” Rawlinson said.
This year, Qurate is looking at opportunities to optimize assortment and pricing, trim freight costs, negotiate vendor agreements, strengthen margins, and enhance analytics.
Qurate ended the year with less inventory, though “leaning into clearance impacted our ability to put fresh product on air as we dedicated air time to inventory reduction,” Rawlinson said. Like other companies, it cut orders last year to deal with limited storage space after the fulfillment center fire as well as tepid customer spending.
However, the move was not without its consequences. “This receipt management impacted our ability to offer customers fresh merchandise in Q4. It affected several categories, but particularly on home, accessories and apparel at QVC, and apparel, accessories and jewelry at HSN,” Rawlinson said. On top of that, promotions and clearance activity cut into product margins. QVC US and HSN’s inventory fell 27 percent from June 30, hitting the targeted goal a year ahead of schedule.
Qurate is generating revenue through streaming platforms from both existing and new customers, which is good news considering streaming services now have a larger distribution reach than linear TV, Rawlinson said.
Products that have been doing well include color blazers, French terry and private-label sweaters and apparel, as well as heeled sandals, pumps and wedges, leather handbags and accessories, jewelry items such as diamonds, gemstones and earrings, according to Rawlinson.
Advanced analytics are helping Qurate optimize product price and air time to drive real-time pricing and promotion adjustments.
Bill Walker was named chief financial officer of Qurate Retail Group, and will join the company on March 20 from Everlane where he was CFO. He was also the former CFO at JCPenney. Jim Hathaway, interim CFO will become CFO of QVC US, Qurate’s largest operating division.
The company did not provide an outlook for the first quarter or new fiscal year. “We think we bought ourselves time to implement this turnaround story,” executive chairman Greg Maffei said.
Net Sales: For the three months ended Dec. 22, revenue was down 13 percent to $3.53 million from $4.1 million.
By division, revenue at QxH representing its QVC US and HSN businesses fell 11 percent to $2.26 billion from $2.54 billion. Units shipped were down 9 percent in the quarter, with average selling price down 3 percent. QVC International was down 18 percent to $666 million from $813 million. Weaker consumer sentiment due to inflation in Europe drove a 6 percent decline in units shipped.
Zulily’s mom-and-baby business saw revenue drop 28 percent to $254 million from $351 million, in large part due to lower unit volume. The division at the start of 2022 reduced its workforce and shuttered its fulfillment center in Bethlehem, Penn. The Cornerstone business—its Frontgate, Grandin Road, Ballard Designs and Garnet Hill catalog and online sites—slipped 3 percent to $348 million from $357 million. The division saw softness in certain home categories such as outdoor furniture, as well as in women’s apparel, in the quarter. Qurate reported strength at its Ballard operation, particularly in bedding, fabrics and lighting, as well as “demand for textiles” at Garnet Hill. In addition to apparel, the nameplate also sells select home offerings in the bed and bath categories.
For the quarter, adjusted OIBDA (operating income before depreciation and amortization) fell 64 percent to $197 million from $550 million in the same year-ago period.
For the year, net revenue fell 14 percent to $12.1 million from $14.0 million.
Earnings: The net loss narrowed to $51 million, or 13 cents a diluted share, from a net loss of $215 million, or 54 cents, in the year-ago quarter. On an adjusted basis, diluted earnings per share (EPS) was a loss of 5 cents.
Wall Street was expecting adjusted diluted EPS of 17 cents on revenue of $3.51 billion.
Qurate got $182 million from finalizing the sale and leaseback of U.K. and German fulfillment centers in January.
For the year, the net loss widened to $2.59 billion, or $6.83 a diluted share, against net income of $340 million, or 82 cents, in the prior year.
CEO’s Take: “We are taking aggressive cost action and have new processes in place and [are] using cost discipline,” Rawlinson said.