QVC Group Inc. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Delivered solid quarter with gross margin expansion for the fifth consecutive quarter and Adjusted OIBDA growth through cost and efficiency focus.
• QxH invested in Age of Possibility campaign, saw strong initial reaction; customer count declined but trailing 12-month showed stabilization; existing customers spent healthily, new customers had modest growth.
• QVC International had stable revenue and Adjusted OIBDA growth, led by QVC U.K. and Japan.
• Cornerstone impacted by housing market, but gross margin expanded.
• Streaming had strong momentum in Q2 with double-digit growth in revenue, minutes viewed, and monthly active users.
• Hired Mara Sirhal as Chief Merchandising Officer for QVC U.S.

Segment Performance

• QxH: Revenue declined 4% due to lower volume and shipping/handling revenue, offset by higher average selling price. Jewelry grew 12%, while beauty, apparel, accessories, and electronics declined. Adjusted OIBDA margin increased 110 basis points, with gross margin expanding 160 basis points.
• QVC International: Revenue flat in constant currency, with QVC U.K. and Japan up mid and low single digits. Adjusted OIBDA increased 8%, margin expanded 75 basis points.
• Cornerstone: Revenue declined 14% due to housing market challenges. Gross margin expanded 320 basis points, but SG&A deleveraging led to a $6 million Adjusted OIBDA decline.

Guidance

• Anticipate consumers remain selective in spending due to macro challenges.
• Plan to continue disciplined cost management and expect further margin expansion from Project Athens initiatives.

Risks

• Macro factors like inflation, housing market pressures, and election/Olympics impacting viewership.
• Freight cost volatility, including spot market pressures and potential labor negotiations.
• NASDAQ listing concern due to stock price below $1 for 30 consecutive days.

Question and Answer

Q: Insight on consumer spend, jewelry sales trend A: Consumer is choosy, jewelry sales up 12% despite macro challenges.

Q: Margin improvement drivers in H2 A: Mostly Project Athens with various work streams.

Q: Capital structure thinking A: Focus on extending run rate, managing debt due in 2025, and planning transaction in 2025/2026.

Q: Sequential performance and exit rate A: Viewership impacted by events like elections and Olympics, general consumer behavior as expected.

Q: E-commerce profitability vs core business A: E-commerce profitability similar to core business.

Q: Cash at Cornerstone and freight rates A: Comprehensive cash disclosure, managed freight rates through spot and contract.

Q: Mitigating tariffs A: Diversified supply sources, not seeing unmanageable tariff issues.