QRTEA - Earnings call transcript Q4 2019

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Operator

Welcome to the Qurate Retail Inc. 2019 Q4 Earnings Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, February 26.

to Officer conference of and like Chun, to Investor now Portfolio Chief Senior would turn over the Courtnee Relations. I Vice President ahead. go Please

Courtnee Chun

Thank you.

Form Before or the of including the Private that filed Litigation company Reform a remind XX-K forward-looking like number XXXX. risks within differ Securities we those Actual materially and of the includes to events statements of uncertainties, call most could our mentioned certain everyone with meaning the Act begin, we’d results and recent this by in QVC to due SEC.

as These conditions reflect forward-looking based. undertaking statements the such any or Retail’s expectations change to events, any thereto this speak expressly any statement revisions is obligation or only call, Retail and in any or Qurate disclaims forward-looking updates any change regard in of Qurate circumstances, with statement to of herein or which any disseminate on to date contained

including discuss our GAAP On adjusted press metrics, will comparable X earnings reconciliations today’s required and call, along the today, be OIBDA issued including is we financial which with certain can and in definitions found adjusted currency. regarding through schedules on notes margin, release the and OIBDA, constant Information preliminary available measures, X, non-GAAP website.

the available slides Retail we on published These to website. we Group speaking slides Chairman, release. call, CEO, Maffei. our Qurate and are note, Please Today the CFO, have Executive Mike George; President Greg Jeff Davis; on accompany earnings

to Now, Jeff the I’ll Davis. hand call over

Jeff Davis

and basis flat. OIBDA you, year unit X% QxH. X% XXXX essentially Full and net Adjusted Beginning volume, declined good XX on points. with declined Thank revenue lower margin everyone. morning, ASP

the product due sales, presentation X of on cost was margin website, associated accelerated inventory management cost which of exit As by with of from pressure pressures optimization freight headwinds our detailed These partially on of to offset the mix. includes our and Slide related primarily Designs network sales cost and and were rate initiatives our Ingenious freight elevated improved cost to warehouse general increases. our

increased Adjusted from XXXX quarter primarily OIBDA on benefited performance was headwinds as XXX also OIBDA reduced the points, trends. the by due ASP. a X% sales declined lower of same to flat commissions, largely Net cost full declined revenue basis margin X% partially in marketing. Fourth offset and volume Adjusted of year. TV continuation

by Adjusted of charge lower the impairment OIBDA quarter, and benefited a from spend. compensation incurred TV increased name. fair the In offset partially HSN’s reduced to commissions, we marketing million incentive value $XXX trade fourth noncash related

fulfillment begun network XX, synergies optimization cumulative product XXXX. onetime We continue from shipping to and synergies have our through cost million of net we project, cumulative new realized progress on $XXX million our and $XXX make of Northeast center. growth December We

synergies customer shortfall portion reinvested these improved be future our The periods. We of captured customer for and a experience. acquisition guidance in XXXX will into

forward to synergy XXXX long-term XXXX, targets. remain years to we our Looking through achieve on track

continued to milestones XXXX, of benefit In face several Phase tax we two, renegotiated facility and we headwinds lapped duplicate labor experience optimization. of one, to to and the reduced following HSN’s carriage remaining of through have fully complete have factors: majority QX due margin year through the as we our the the agreements; X we expect cost network factor QxH

to to To initiatives. margins headwind synergies a – expect expect in these realize sourcing take facilities. five, reduce invest And marketing. to continue previously prepare actions, we in we announced additional associated cost taking increase XXXX, Four, be this integration and and XXXX. to are to as to clearance to inventory will take compensation pressures, a was action counterbalance Three, continuing a actions cost through the variable number we approach partially transfer disciplined we we decommission product of fulfillment centers, the other will incentive strategic to in while

and QVC now partially currency, volume revenue offset reduced In year X% by grew higher shipping X% Turning revenue. lower constant ASP, and QX full X% and to handling on net International.

respectively. fourth and year, the points, points quarter For and full adjusted XX improved margin basis XX OIBDA basis

periods, of higher For that operations the expenses these from partially new offset margins international product with which by were cost, lower France, closure fixed gains shortly. describe associated the in primarily and will Mike included structure both

$X At loss year discuss impairment will year billion Zulily, the eroded Zulily incurred the in charge to and revenue QX. full Full substantially, XX% that to declined primarily XX% for operating also. Mike in QX shortly due due factors the noncash

fourth chain the year, The reflects margin OIBDA adjusted fixed declined respectively. partially spend the to of because XXX points, from rate quarter double-digit management full revenue team the and marketing cost a offset remained For decline, supply return. and deleverage basis primarily by erosion diligent margin total XXX a and lower

margin and in for and grew QX At OIBDA million model the improvements QX it business to in quarter the Cornerstone, reduce enhancements expenses. of led in was that flat the in fourth its momentum operating the execution revenue closed in second the excluding and the year, of by sorry, relatively full $X flat X% XXXX, The business in year home QX adjusted year. initiatives operating and for gross of lower the brands, gained year, grew half in was million $X certain marketing full – fixed expenses

to-date. we broadly, not Looking from impact experienced material tariffs at the have business a more

between We U.S. agreement was a China, monitor the Phase continue are reached pleased X and to that developments. and we’ll

The capital in the fulfillment XXXX now for U.S. the the were Capital QX certain flow from and guidance, a the $XXX and of for were year to Moving primarily due was to and capital $XX as increase revenues. expenditure improvements expenditures, cash million basis, assets. due X.X% classification full capital IT expenditures is which other year Total to below on network commerce net million in platforms. our investment full structure. cash leasehold continued optimization and primarily of

to net expect increased anticipate me, capital cash focus excuse $XXX cost rate an and basis to in to operating cash adjusted CapEx of to we X reduced higher working XXXX normalized offset cash CapEx to management, time, able For flow X.Xx X.X% free a related a growth return of we – to million OIBDA Over with normalized from to more range on grew XXXX, X% We $XXX rate of lower on capital million and transaction on taxes, and we’re at revenues. Retail an expenditures. to Qurate basis.

payment In such improve to program overall our additional with free reduce working closely further expenditures aligning XXXX, as January. everyday new capital flow announced we expect Easy and conversion to Pay, vendor cash FlexPay our actions, capital terms more in

customer below revenue. X.X% program, this have and space We of rate ago are long in where track default adopter is net the an a record years in managing early our

including state estimates Retail average tax years and of in rate tax investments. taxes generated net three Qurate XX% Qurate annual foreign federal, will its be of that by Retail’s energy effective next over range credits to XX%, green the the

and rate and thereafter of this lower end be credits of at increase energy range will in XXXX to Our will due the expiration XXXX. the than XXXX tax effective significantly certain green tax

exploring time. energy post XXXX, but investments actively generate – this tax on green yet investments new are that have at tax these closed will We not credits post

of QX, secured was December outlined tax a we our in compared was In Retail’s items as QVC’s million senior the impacted revolving X.Xx. in defined at In X.XX% earnings notes market XX, of one-time various $XXX as XXXX consolidated release. XXXX, of to X.Xx press issued our rate in addition, in a duration total book years. by permissible for bond retail agreement, credit At coupon leverage, XX a a Qurate of

at the bond million, secured Upon recently, for market total issuance, now in secured of closing million we $X.XX More a capacity coupon duration we our a XXXX years. $XXX for provides which February revolving senior a issued XXXX, the reduced notes of February billion total in by capacity. of of institutional another the of X.XX% facility $XXX senior credit seven

When progress the internal remediating our the notice XX-K with our globally, you later material access our exception access overall weakness and on fully Germany. in front, in of made weakness certain filed controls controls. one IT material is this in significant UK improving controls We’ve will a today,

fully to committed are these near-term. very the We in issues remediating

Is Mike the on. here? Mike to I’ll is call Now turn Greg. over

Mike George

Mike. QxH QX. those disappointing it. Zulily, into Jeff. morning, Jeff, This was good challenging obviously Thank a Thanks, Yes, I’ll and everyone. XXXX results continued year as for us is take you, and for

the accelerated at we Group investment, capital free Retail cash OIBDA grew and revenue Qurate flow the despite decline and for However, the year.

we And priorities importantly, advanced strategic outlined November we our Investor of Day. at the number a

the While intersection and e-commerce. on is we of we’re way to work at have and media actions confident dynamics to in brick-and-mortar both much still front us, that the of retail, us taking a enable differentiated lead shop highly to from transactional industry third offering social, changing we’re will capitalize

on Before coronavirus business let briefly reviewing our comment the segments, me outbreak.

team members partners to ensure region. been has the and to the health safety our appropriate first Our measures of priority in take and

and Our factories returning assurance are restart now teams gradually work, are to beginning sourcing production. quality and to

the supply situation disruptions actively impact product shortfalls we and in developing contingency supply. While any the remains plans to chain of mitigate ongoing anticipate fluid, do are

Zulily company, has carries most has to-date since affected inventory China large been business. direct ship the a minimal the it and Across

challenges As actions of to remove potential and a result, too meaningful will at continue we’ve daily Zulily developments lines but our to from early events It’s sales number we take a other offerings, to had assess impact. a sales unfold. product as our businesses, causing

our QxH business. now to Turning

described on consistent issues challenges were we performance QX call. in largely Our with the last our

in the revenue declined QX Design fully full in came which The in largest $XX now our we’ve million at home Looking subsidiary, Home year. of performance. the $XXX million from and category HSN’s Ingenious closure pressure lapped.

by gourmet lower-priced care, and food, pressure segment, continued brands iRobot, Waterpik. alternatives. to mattress leading business With saw shifts care in premium the personal also and offset Sharp; in and was Dyson as gains in floor Sonicare This Philips in erosion We including partially that

declined accessories the $XX tough full in reflects data according footwear, in apparel, includes for primarily down three from year. and and NPD. which categories million industry This fashion, market the performance cycle, $XX with revenue all a QX to In year million

year, We’re of second QX year share, offsetting industry back the we but generally softness. the our not for purchases Earlier recognizing and reduced in weaker the industry time. air inventory cut half trends, the apparel our holding

in $XX and million $XX declined Beauty revenue QX year. million full the in

few seeing marketplace highly we industry expanding in with brands, slowing We’re a largest of a distribution growth. competitive our weakness as face and

growth Beekman XXXX, Lancer and We assortments diversified brands, good like emerging Beauty. with Belle to continue in on focus

year. million Consumer $X million increased the electronics revenue in full QX, declined $XX but in

Fitbit; on including such wearables, declined While in airtime, revenue we in offset ASPs. productivity. audio TVs, which we full reduced which see Bose, QX year also puts in and In laptops, primarily improved million in tablets strength by erosion and with to $XX by as partially $XX driven million continue is saw jewelry, the and brands pressure

category. concentrating sales enabled drive the that substantially on events per focus of jewelry engaging decline highly in on our increasing the reduce tune of minute by to handful airtime Our in, a us rate

Overall, the view. customer the the decline to revenue in decline. turning months the is in XX consistent Now with customers last

in count existing For the customers, declined full X% X% for year. QX and

the For at XXXX a QX new QX new count down primarily QX customers in reversal when customers, a due comparison XX% was of is declined in grew and The decline year. full from to recent X% growth trends, in we slightly difficult QVC.

in cohort. driven customers, count reactivated in is For apparel, in by category softness which X% QX largely XXXX and this a the key X% declined for

Investor XXXX overall believe, at Day, three was impacted, outlined by we As we key in performance factors. our

leads TV First and changing proliferation, product industry we’re declining cycles. volatile more long-term linear which brand shorter operating rapidly and in importantly, growing viewership headwinds context a and most life from with to

of accounted of which for our larger sales XXXX demand XX sales our XX% represented decline. of XXX% brands, fact, In more than just XXXX

offset While of brand more begin fast brands finding declines. most to to that level it’s scale decline, enough a it business then peak get that and these natural we’re taking hit to part fully new is brands large to a our

media for momentarily, of respond landscape caps and a our more believe before, our pressures and new curation And these access into led in I’ll ways creates has share more strategies types us, while consumers real, product and are also this more more opportunities engaging challenge. we transactional ever experiential, as growth to desire this are DNA. And on industry core to more changing than which to authentic, of for e-commerce the that alternatives

several a fashion in finally, network organizational a slowdown made, due purposeful restructuring Second, short-term high a years. which long-term of all to saw subsidiary And in combination extent, Design the we some to together, invest changes choices exacerbating have for fulfillment pressures, lesser our experienced close along over and cyclical beauty, been midterm. top we drivers disruption we’ve cost down trends, cost to these service with and the levels Ingenious to lower and, structure in growth its associated improve our with

as intense on is offered relevant believe immersive So discoveries to year, flexible customer as a our consumer engagement today reach focus despite low and ever, values experiences all the spend, loyalty. with enormous engagement, at and with the social highly curated we its compelling scale, marketing disappointing global options, astounding product platform with video-rich leading payment unparalleled

coupled recent inevitable shopping cost and the of is The at brand-building facing customers’ underscores also pressures the the both customer the something experience explosion those with our reach, now efficiency for proving so direct-to-consumer brands, platform. and high, attractiveness in of are brands highlights more of sustaining desire

As at Investor this enable take will focused offer. intently five that we to shared platform to we’re accelerating has on Day, what advantage us of strategies

TV third, every digital making curate and special bit reach First, compelling websites as traditional engaging values; sticky live at reimagine daily relevance; as and second, products extend apps and video experience. discovery, our our

customers the our and finally, expanded service customers’ delivery passionate the by journey engage and customer expectations connection to our deliver meeting that – loyalty, and joyful users and expand marketing; joy Fourth, of existing brand. increasing personalization through the customer emotional deepens and reaching of new moments engagement our injecting performance throughout community, rising our service

morning, first curating the distributing two, on This video. provide to our consumer an access and everywhere update products content to like I’d great

our resources business do. greater we our center today’s nurturing at product ourselves both brands of for and expansion differentiation, product the we adjacent with discovery win starts increase everything a pace their to our innovation, To environment, and categories, our underserved amazing devote strategy product increase product more in drive at so is life special Our with products expand of and through values, cycles. into pace partners, to vendor need of and curation capacity

expanding Giuliana of many programs in bed by and box and discovery Loft XX design, Street Potion Jill across ramping beauty; exclusive at by and We’re a creating in Nights our our offerings, apparel, launch and Northern and the innovation among proprietary capabilities by development XXXX successes differentiation categories. driving Martin in South home; included G others.

the we’ll the including new capability, of design bring XXXX, development relaunch IMAN In XX of next major least through in-house developed our at HSN week. launch brands at and

introduced XXXX. our outerwear, well Zuda We’re more a ones brand, and XXXX, categories as underpenetrated Mizrahi, launches we tackling with we’ve New athleisure athleisure including feel we coming key inclusivity. proprietary like In Balance as where strengths, size and three proprietary proprietary like Merrell national by underleveraged Isaac offerings, and brands LOGO in

Arctic expanding fashion great inclusivity been our saw we outerwear, In one age for decades XXXX. And price. Laurier in in and at Montreal success QVC further all virtually and with HSN are offerings new the full-size Expedition and have range products size leaders offering uniform in

two are further and underserved with adding in outset sizes like the size and developed outerwear activewear. be influencers. Xx many brands from highly for in we’ll first and In time, Xx we’re body the larger in partnership expanding range, positive a launching and categories, brands that designed Now with XXXX, perspective regarded the

innovation. Recall In more on more enhance QVC merchandise HSN We’re spend category and investing enable a XXXX, specialized organizations finds discovery and to special more also to in functions. in capabilities holistic we focus combined the buyers administrative in time less curating our time on XXXX view. our to the and take to organizational market, steps we’re taking that

alone, search in follow. an we from two big in QX nationwide fashion search Find, summer, successful and next more QX brands beauty, the a with with conducted in Last additional for The launches XX to Big jewelry, the and

value at that of the market. to item, offered also and a to charges, shipping to products, Now inclusive have with special win we handling ensure relative compelling is every

similar every we option, become been Pay took typically in other offering This among January, value at by much cost. higher has – popular consumers, retailers we In on but operating FlexPay payment forward this U.S. at popular item a HSN QVC provide a step as at sell. and substantially a our has another Easy big story younger especially programs now

acknowledged But our time the it We to to of will to in we’ve sufficiently believe growth. offset larger some some for brands. also these scale erosion prove initiatives these instrumental in return our programs will take product

can’t discoveries of video course, platforms. and consumer, extending front matter these investments which across to priority, product of our our reach in our we Of me leads if second get curation none the relevance

puts our The relevant viewer and future is as cutting a era, supported content by fundamentally new While distribution, reshape base. platform potential discoverability, that we we we’re more of and that new video and control customer and cord investments pressures interactivity entering firmly short-term enhance increasingly video methods the shopping of tailored of accelerates, our face believe shopping will about expand in ubiquitous the innovations multiple lifestyle unique experience. and

these of And so go through each components. four let’s

First, to accesses the video ubiquitous distribution. consumer wherever content. we need Simply stated, be

over other MVPD have to as as our today, introducing a growth And OTA grown XX attractive homes we’re five virtual unique rapidly have our still The another MVPD million to an million a which also vast million as of as a service. majority over-the-air declined XX has peak multi-year today, channel distribution XX demographic retailer. digital It’s in in provides bundles, XXXX, every While alternative skinny pay-TV approximately from a of began distribution, our alternatives, we early with And in opportunity. homes. advantage pay-TV. still target known locations at consumers of XXXX investments provides networks

adding QX, we on NOW, And TV launched distributors – in additional and this year. AT&T anticipate we major additional

the TV we enhanced leading service We’ve and streaming We’re partners. combines teamed providers, content. QVC that HSN Fire greatly a over-the-top best TV. the Roku, Apple and on launched major Amazon device Last in including multiple year, Roku and up innovation app offerings with Amazon with streaming

And year TV prior and we out top universe to installs rank XX,XXX net growth saw channels. apps XX% million a the overall an movie X.X Roku, of our their free year-end. of by among With app we over XX in

our recently to and networks and HSN TV offer XUMO Plus. Samsung manufacturers TV LG on partnering streams We’re directly, linear launching with Channel Plus, including QVC

access subscribe broadband for their We’re video subscription. without a working distributors with an offering, that to homes to their alternative such to streaming our service, as platform cable Xfinity only homes Comcast Flex the

programmers and focus YouTube, aggregators significant our to Instagram minutes we’re have to both also and the and aggregators, in And exploring and relationships continue our in audience other of digital own of platforms app We in digital feeds viewing access. growth course, their web our And Facebook. on seen like video stages platforms. leverage of with linear on we’re early focused

September, David, on In popular Dabl. example, lifestyle new network, launched with CBS’s program, and The For we our Kitchen most in OTA streaming

We be to expect us later audiences. new relationships announcing year will other introduce to new this that

second and component the remotes The is by the of way all search devices of video and Direct platform growing the connected of are services. discoverability. find shopping future smart content, devices fragmentation voice-activated interfaces, compounded the changing viewers

So channel leaning into shifting achieve we’re to develop with savers, ways advertising, address working initial our selections, positioning tune-in and placements. messages carousels, to this to new prominent landscape, featured through program electronic screen banners, addressable partners audiences, guide

Leveraging has of some wins early these types our with Roku. led techniques of to

is investment component our We’ve recent audience. fits content a in and significantly ensuring as increased tailored the offering I’ve new the on third shared we’re platform relevant lifestyle shoppable and that The variety of content, calls.

an interactive, aim television be for leader a we experience. new creating possibilities to become video platforms innovator the shopping Finally, whole increasingly as and

Amazon. current seeing power in as or the streaming Roku We’re on when the the she of watching our control is of putting already user app content,

with marketplace. lifestyle plan QxH next taking our Later and even to service the at streaming that immersive remain retail growth experience. pay-TV the strategic will shopping holistic and intently this year, profitable to a partner and in retail anticipate We this create return a step, an dynamic and bringing on more focused media convenient we compete market

which impact, working recognize that growth our Olympics navigate to top coronavirus a and timing – number line predict, also in will the the to we need return and of makes XXXX, factors several macro will U.S. the We’re of hard initiatives, presidential on to election. we including the

free noted, pressures, later making the we’re sales the the do year, to began capital working yield see, in pressures in efficiency Coupled XXXX. anticipate we this improvements experience expected Jeff of our in to and that management, with the year progress second half flow on we will of as seeing synergies, these additional with as moderation with the that a conversion well. on our focus in even prudent part cash we cost and capital start we anticipate OIBDA margins, However,

to International. shift QVC Now let’s

consumption by to led our We tax across by October performance Japan, went programming, that drove effect X. the mitigating broad-based be where continue strong execution product effectively challenges the international solid team encouraged the and into increase QVC of

with we As growth to optimizing initiatives, airtime, International continue efficiency activity product to QVC and enhancement in drive promotional margin will rebalancing strategies the support forward, TSV on mix, including and and international, inventory long-term performance to focus To our margins. look brand we drive vendor marketing international announced region-wide drive a cross-market and growth, resources in new structure recently strategies advanced strategic merchandising enhance new development, analytic and investments partnerships. digital teams and deep

Their the by longer-term continue We we a savings. addressable consumers willing outbreak, serves from of several performance cost, Zulily. headwinds existing frequency opportunity. on short remained challenges product lower believe delivery purchase in large to Turning compounded the coronavirus acquisition highly with And to speed are for challenged in of trade while faces continued Zulily market due customers. to see meaningful who dimensions, new along Zulily customer to and term

leader new Merchant, machine business innovating and talent the last customer add Chief a top leader and address to for retail, the strong several experience. Marketing we across months, hiring current technology bring learning backgrounds of performance just a To development whom the continue marketing, all a to data, and for in including, Officer, challenges, a for a in organization, new Chief leader

find unique to and leading remained highly new acquiring Merchant and reduced focused brands Chief On continue efficient returns both disciplined leader products, new new marketing marketing product, spend in and on QX. the experimenting and Business XX% marketing have vehicles. year-over-year acquisition Development national more to brands with on We’ll finds. channels We are

Price customers’ the increase In improve foundation These its actions earn transparency product and Promise Best and trust. experience. to with Zulily market initiatives customer launched a to combined as October, are

and from category improved spend in also shop new home returns and pilot reduced we’ve search, areas in redeploying like marketing programs, the and by functionality videos. savings shipping product site We’re our page

taken Finally, and last we’ll we’ll cost going management summer, forward. from on actions benefit disciplined a maintain cost focus also

At year retail strength home highlighting revenue, in the OIBDA built of generated brands. seasonal driven in Design success second led Grandin the the momentum its stores. Road Cornerstone, delivered QX of the record half by Ballard we business. record QX by

we Grandin will As focused Frontgate’s sustaining brands, Ballard’s in retail Road’s forward, and particularly furniture and outdoor Cornerstone on momentum home assortment look be expansion, home with accessories.

In summary, while our on XXXX and QX results we were disappointing plan. resolutely remain at strategic QxH and focused Zulily, our

We and our discoveries, customers commerce in and business are video-rich ability model audiences our core experiences highly of aggregate across curated platforms. the immersive confident of to live multiple strengths engaged

it Greg. over with turn And I that, will to

Greg Maffei

Thanks, Mike, script. flip slightly and I’d

Let’s review XXXX areas for the capital mentioned. previously had our across allocation we

business end ramp CapEx pay at investing start deployed which in the integration. XXXX. to First, the will Part and related initiatives, HSN this in for to our center to million We a further little fulfillment were in back IT we bit and those in the It future. of are was due obviously XXXX. $XXX elevated year some of

lower XXXX. to CapEx expect We be in

our MSI total return repurchased tax remaining hedged exposure bonds managing million We swaps. exposure. Second, of through exchangeable our $XX and

We to QRTEA shareholders. return repurchased Lastly, $XXX shares. of of million capital

Given remain buyback. the and the the cautious results, the stock volatility of on we

your your for We calendars Meeting still free New we XX. Annual we headwinds prudently Investor experiencing our on it Please is While mark appreciate Thursday, November and the continued cash interest and will business generates flow, York strong allocate opportunistically now, some Retail. Qurate in in it. note

I’d open line now, like questions. operator, the And for to

Operator

UBS. [Operator We’ll Thank first Instructions] to Eric Sheridan you. at go

Eric Sheridan

Thanks lot so for much there. questions in

maybe if So two, I can.

to for translate into of QX? a a of QX might business as situation, types there to it’s and we seeing quantify Jeff’s there there. part time, what time probably the food the an seeing you’re to But is has headwinds either of the headwinds edge your of On translate a inventory beyond as so to into to going virus of you’re what unpack forward? commentary, nobody that in seeing a to periods. what sort is quantify the much can those or you’re chain, And so to way in in there’s how disruption revenue, potential moving Obviously, kind real then lot way

know tailwinds things of headwinds that. to Just to XXXX – the want in some look to you’re tailwinds margin on the as around some sort guidance and you of better can how granularity in structure get se. the and But better Thank we per lapping against better if business, sort without much, and so headwinds guardrails you some there throw were out guys.

Mike George

I’ll take first second. Jeff will take Thanks, Eric. and the one, then the

to virus disruption, the it assess very hard the is On impact.

leaning quickly back outbreaks anticipating up, were the ramp the shift clearly, How would result. there we able all up, been maybe guess were into say time ability markets. to getting So transportation weeks whether our the today, of factors then, best risk and there four so most a given I products impact we’re the future everyone’s that to six to bottlenecks product in whether week to those products, to is all another the looking are have anticipated, out production slowdown in to and three given other factories four out closed, of our various that are importantly, coming

models, the HSN an is available, where we’re if can making every what go on items item fortunately, to So decisions and to with else. day to something not QVC the as we script show,

see would we that see to point, to we impact, be fully to to short that. limited special big, offset get if value programs unlikely enough too it’s materially adjust early the of today’s term, But delayed, able relatively So our sales at really or this pressure. were other significant little in some a

hard as more exception those have some a supply an not, top to very be with or they’ve hit expect the impact, of they the it immediate sales base significant I pressures pressures. relationship So sales because immediate dimensionalize Zulily, seen experiencing mentioned, to if we has been will which, on of

then, And take question. you I’ll second the Jeff, let

Courtnee Chun

Mike, I think if you one. he’s take having that some technical difficulties, want to

Mike George

think kind in headwinds of was just and XXXX. I tailwinds Eric, question, So your around

better with can freight do improvement he that three level. pressure try at high So of but causing year, to and can on, pressure is negative lines. which fulfillment some Jeff both the we on as get back does the network biggest add a as pressure year. quarters expect I’ll summarize is That point late impact And to two later the in a it. get The optimization, to get in we

large ultimately on P&L, the That pressures gets a this a have but impact and then better. of we’ll to flips positive that year, through part

incentive on so and build The fact incentive are P&L year, our pay just the fixed pressures some costs. didn’t we other we’ve last the compensation cost on got that have we’ll –

you generally continue That’s that invest of offset evergreen to to little been know, than more we bit more synergies. performance the marketing. As able in We’ve investment. through an a

say about I would good margins product year, the improve margins. we pretty So the and doing to the feel product work in we’re big variable

And the marketing so this get in is year. which the bubble gradually year the half, network sustaining getting later performance of we more in cost in front the with big will optimization, in variable investment be to as positive both the and negative through turn start

Operator

KeyBanc to Yruma Edward next at Capital Markets. go We’ll

Edward Yruma

first morning. housekeeping Hey, the Thanks a of for guys. Good taking more I guess questions. question.

then context since some trying closure much of math wanted Thank about XXXX, in to Just pay of was I help of today, And I I on sloppy it some what you as think we margin in you France two as percent with think, what sales And do how will a know had gross us, to Easy guess, of is do behavior assure lap to? you. about March? you won’t and get the just on some issues, Easy the lift Pay. you to expanding comments difficulty second, ago. just Pay years some

Mike George

start Pay Let question. Easy the with me

the it speaking Pay. Easy market U.S. decision on did they Customers of at just or make a the to do have a of to then both. products just our now. it internationally. We the I’m price, offer years, year offered and substantially and use as to pay over different do full we start the little on all substantial take some the So offer a that choice whether It’s We’ve items. number

a been substantial that – again, consumer a it these largely don’t codify don’t impact to available pay is, a So shopping we we’re we Q substantial previously, when – we’ve from anticipate think because of don’t of broadly and benefit offerings, it’s which we we P&L the see expanding where on going program make H. necessarily with as trying about impact

that’s consumer, worry We the that Pay. value the easy more feel going normal. to think experience item to and have program. me, to get about Easy just We enhances to is offering make about don’t you the which one to the it So good us to shop new because reason gives

H. Pay at and kind if don’t is So of And as universal at go-forward effectively, Easy approach Jeff I a back. know FlexPay Q

Jeff Davis

I’m to France answer going the Yes. question.

Mike George

We can.

the take question. France can You

Jeff Davis

time, Okay. I I hear not did they the please? more one question France getting in. Could back was the question. ask redialed

Edward Yruma

just was press know and France France, a that the trying the margin to was in there release gross I gross I commentary did margin. – understand, Yes. cited lift you the of to closure

I to year, kind think, what impact the understand understand this And in to was to to Thank there. so March in you’re lap closure, trying I this aggregate the know Just begin dynamics you. trying of going of XXXX. then

Jeff Davis

to and thank margin overall of France related About that year. this closure the the was earlier Yes, occurred XX% improvement you.

Edward Yruma

Thank you.

Operator

We’ll to move Wintermantel Evercore ISI. Oliver next at

Oliver Wintermantel

thanks use would you XXXX. in cash that free Yes, very expect flow, to I I be flow that XXXX. question cash just a that And that mentioned was see wondering what to you of much. in improve had free the

Greg Maffei

about about then talk feel – it, you cash want and don’t is flow don’t Mike, why Greg. this free you just I’ll why operating if you about the you and to add uses. – Well, anything how

Mike George

to number would move OIBDA as payments of in a programs XXXX coupled of a feel I number capital we efforts distribution the strengthen our of towards performance to conversion we’re the we our somewhat good expand really partners. new ability efficiency, Yes. as move to cash latter doing work level lower just spend working bubble in lower to other all the flow of actions, of capital programs, trade terms, continue in as improve through addition a payable the part well among some free we to to of optimization network our as with say about some year,

a I’ll So talk use cash Jeff cash. expanded I’ll then this Greg of about we think – let good And flow year talk conversion. for let can free be

Greg Maffei

second, our the where outlined places managing we the and think I tax we’re focused: business; in first, So investing exposure.

that talk let’s So about second. one for a

potentially on including investing returns investments capital. the out to have And of in continue and advantage that the that we’ll other kinds bonds. date down We a IRRs we We’ve think, generated have, a you very for to made of and exchangeable to gone ways bunch and bunch. tax so-called hedged green I attractive repurchased as manage we’ve at know, think that, investments look

to goes regard. And remain the is and year far There the in – – we as in As capital capital year the returning with marketplace. for volatility, shareholders, the do as on, wait in rather, on we that both what we’ll business through cautious.

Oliver Wintermantel

Okay. Thanks much. very

Operator

next our from Bank America. question Heather Balsky take of of We’ll

Heather Balsky

Hi, you I shipping was for you little about bit handling talk a strategy. that and hoping thank taking your could more question.

bit Day. little a and And based it shipping looks down handling quarter the just November was math. on at spoke in You at like Investor bit a QxH my also the fourth

Thanks. So what’s just on there? going curious

Mike George

we Thanks, Heather. I to an shipping event and to an how would level say item want continue we at and evaluate level both deploy handling. just

have standard do are in of and item, It sure we reduced sort have some forms. handling that more a substantially that as think to little that’s is of we – the takes focused takes competitive. a where handling market and the we making We kind revenue with It form include we shipping and price of so. one of that, and a on gradually shipping couple QX,

run a benefit. And also shipping offer then free day events, we events, as where all events flash we’ll

was higher handling the It a as product of I that intensity or that. competitive promotional That’s this selling promotions, by mix more make product even margin. compounded shows impact that pullback slightly you intensity that revenue, season. in little high handling our up shipping be. a be on and in was weekends flat. shipping we to a key aggressive short every We You up It that down, note goes product as The and would with definitely you’ll year as in note got more very to cost and could QX. about margin bit was to you’re sure see And ago. QX. year high those expect on

were in improvement we investment offset handling margin as shipping able So to the rate. and product

marketplace, shipping about ability also good in but our and rate. offset pretty the be handling some So investment that of to we competitive felt in margin product

that with And then it’s can move the work as consumer, we we to item so of most forward get front, S&H make price right need. choices all bring optimized mix to surgical margins and how make value continuing deliver sure get and forward what the to we promotion use but the we also about we have to our to vendors and to costing to as that the to

Jeff Davis

to Mike, number working up you and our that If a these bring add I suppliers supporting point with can also, events. the of

the product certain will from a and us the elements shipping events, supports margin support handling on to is of that us which margin One items rate. overall also that vendor maintain provide and/or us helps when for also

Heather Balsky

– across of your business the categories your and what of seeing growing decline. representing XX% other Thank talk question, the different then? the another and Can you all as How you. you’re do of of sales business your about rest brands XX that? you we is about And XX% in talked

Mike George

you is than aggregate, brands I a sort the would greater because of of now, right, a bit all then those this It’s nature of always phenomenon tough pressure the down by mean, are closed, with brand in want say, decline, have managing year the double It’s associated are feeling XXX% the to more so little I them to we’re be XX a little of math cautious decline. big But they about Designs with that moving harder a couple a compounded cycle. and of that sort is exits. that little in were are of are bit rest right life the because cycle a kind I business the manage. life up of the this So growing again, pressure And just from business those decline. brands fact that unanticipated business. Ingenious those that of brands we this much fact obviously And

decline. that So brand top a from little pressure more

rate are, not Big we brands the other we’re where – that’s an it’s moderate but growing top all to described the like offerings just to get more those today about exclusive quite platform the the we’re Find to we to using best life even how for get growing I’ve aggregate, growing, stories, tell product use are program, intensity and feeding our our to more higher kind brands level on us offerings funnel about marketplace total our to new brand positive brands just the more to through brands with broader those we to none are need finding unique earlier through And and, actions of creative all arsenal, the find even while those of things need things more – program, declines to development not get are that even crowded just a of top other through the we faster among at range they’re all curation be the at importantly, an most sure in the at of rate. to making nurture the way the getting of that best brands known and brands, the in growth, cycle

Heather Balsky

Thank you.

Operator

We’ll to Capital next Fuhrman go Craig-Hallum at Alex Group.

Alex Fuhrman

as wanted you be this the Thanks other up there ask just much product electronics to Great. your It seems to was very might electronics know categories. looking to XXXX early, think segment QxH, other about into taking XXXX, guys feel were like for categories grow sufficient negative. continue out product there different Or you landscape is in year? do for I you? consumer categories you taking in for my that for it’s leadership the question. consumer for I over you that do whereas at but innovation

Mike George

Alex. I think thanks question, – the for

to cycle. that confident in tend tell. that that based we’re down has that early say is compelling to we’ll so it consumer wouldn’t We I – is have always business. feels electronics it that our think I been years the mindset up and with years on innovation the

electronics impact. from either else benefit as And growing or to then a can negative can. we try mitigate so And everything we any consistent get in way let’s

I items as just business in continues have be smart well. in audio smart in But new be audio we’re – and spaces, now certainly, there home. slowdown wearables hot increases as continue we big rapidly, those off home that took a some trends mean, very to seen anniversary-ing to and and

places And the tablet, so I of that the moderating. And be where for say, market. TV classic is, computer, growth to lower would course, are the do ASP seeing tend now, than we

looking pressure huge So category, either. XXXX, sure we say to not but we cautiously necessarily growth, huge in approach not would I face it’s this also

Alex Fuhrman

Okay. very you. Thank helpful. That’s

Operator

next we’ll Davidson. Thomas Now D.A. to at go Forte

Thomas Forte

Mike. Thanks, Thank. Great.

should to And it’s about the though, affected, how On the distracting Italy? ask consumer. disruption think standpoint, are how I such about a then impacting about from the business in we think we as wanted broadly it geographies that coronavirus, should

Mike George

Yes. Thanks, I to good in and Italy. a take Tom. us read. for of is It’s recognize moment members a appreciate would hard team It to our question. just all

We are in headquartered Milan.

team and right time I’m Milan to their that tough they’re grateful make safe. So now, and team through going efforts and sure leadership are our a in for all partners members

day the our disruption, well. by to day. this members team we’ve brunt members certainly the of without far, been Japanese business team but certainly, And felt have So taking Milan China as operate it and able

would on that any I consumer we’re to not our markets. say date, experiencing meaningful through impact demand

dependent how is on consumer sentiment obviously the hit would folks it. Asia market. say. negative pressures to it of that tourist they’re our to is are one you’ve folks are substantially kinds We brick-and-mortar stock for connected sensitive seeing if bat. a the just the and creates on halo the consumers on The seeing us wildcard in not are we’re heavily businesses Big So trade, know

certainly And so sentiment could pressures that consumer impact and intersection pressures stock market demand. of

it risk. out, But can’t depending date. seen we on plays this out that to how rule haven’t We

Thomas Forte

lot. a Thanks Great.

Operator

next go at we’ll Bazinet to And Jason Citi.

Jason Bazinet

that margin smaller than release, the got France margin you would Can heard this have offset closure go that I Can if the the was offsets. had the I so and a closure that expansion didn’t we belabor right, if impact can confused. margin you in in back and at you I other implies go items, sort to – was the we to hate Yet back saw the the was XX%, In I said by you expansion all French Q&A, point. of have large – international. margins? those just just that closure France it the aggregate of was it to overall of clarify? bunch the international just

Jeff Davis

Yes.

of associated So losses going with have have you some essentially, those the in as result France as losses not business, which the would you were mid-March. incurring had business, of that XXXX in XXXX, been through a that would exit market

So as going of course that was through year-over-year the us were for tailwind we a of actually sort the year.

markets that, were The with continuing efforts. respect of regionalizing were somewhat for to their the fixed were to respect take and a international the offsets taking as actions mentioned, number actions of centralizing really other some though, Mike with had in as their they cost they model to to operating and,

Jason Bazinet

than large. the more is XX% right we I So that expansion not? but were understand got It’s how of must full didn’t it you just overall But quite France the want have – just been those Is was the offsets. to takeaway? XXX%, losses in France margin related. see that the benefit of we because incurring

Jeff Davis

No. No, it’s not.

Jason Bazinet

thank it right, All you, Okay. take I’ll offline. Jeff.

Greg Maffei

to questions. all you Thank for Qurate. your Thank in your you interest for

the Seattle, and speaking quarter’s to As team with always, if operator, in to think before. call, on Pennsylvania I the next much we we’re you Colorado. in very not look forward Thanks done. that With here team in

Operator

conference. conclude thank you And Thank participation. that today’s you. your for Again, does

Qurate Retail (QRTEP) 26 Feb 202019 Q4 Earnings call transcript