Qurate Retail Group’s paying close attention to ocean vessel capacity and the East Coast port talks as it heads into the third quarter.
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Qurate’s CEO David Rawlinson said the company’s continues to see some Red Sea disruptions. The U.S., with 15 percent of volume coming through the Red Sea, seeing little exposure and Europe, where 75 percent goes through the canal, seeing more of an impact.
“It has caused some volatility in supply for our European businesses, but we’ve generally now built in more buying time and vendor order lead times to help counteract that,” Rawlinson said. Qurate is the operator of the HSN and QVC shopping and entertainment platforms, with operations in the U.S. and internationally.
More impactful over the second quarter has been the availability of vessel capacity coming in, which has “resulted in a shortage in the global ocean vessel capacity. That’s driving up rates, especially on the spot markets,” the CEO said. And while he said those rate increases were manageable in the second quarter, Qurate is “anticipating more volatility on deliveries and container prices as we go into Q3. So that, plus the potential labor negotiations with the east coast longshoremen are both things we’re paying a lot of attention to.”
Rawlinson said the company uses a combination of spot and term contracts to maintain freight rates. He also spoke about mitigating tariffs given election uncertainty in the U.S.
“We have, since the supply chain crisis, tried to create some diversity,” he said, adding that as for Qurate’s sources of supply, “less than half of our assortment ends up being impacted by tariffs and even that half the tariff rate is sort of mid-teens.”
Rawlinson emphasized that Qurate has a number avenues available for supply chain diversity. “So we don’t see a scenario either, no matter which way the election unfolds, that creates a level of difficulty around tariffs that are not manageable for us given where we are today,” he concluded.
As for the consumer, he said they remain very “ choiceful “—a term he’s used before—in deciding what they are willing to spend on. “That’s not quite the same as the pocketbook being closed, but it does mean that you have to really excite. When a customer is excited, there’s not necessarily massive price sensitivity,” he explained, adding that sales have been softer for items where the customer has not been “extremely excited by the value.” Rawlinson also noted that Qurate has seen some trading down by customers, as well as a bit more value seeking on their part.
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The company’s existing customers continue to purchase at healthy levels, spending on average $1,665 for the 12 months ended June 30, or up 8 percent year-over-year. At QVC, its best customers spent on average $3,950 over the same period, or up 6 percent year-over-year.
As for Qurate’s turnaround progress under its Project Athens plan, Rawlinson said the company remains “steadfastly focused” on its execution, and is positioning the business for “growth and demand generation in future years.” Project Athens was disclosed in June 2022.
Qurate is one of a number of retailers often cited by credit experts and retail consultants as a “one to watch” given its balance sheet. The company’s total debt load at the end of the second quarter was $5.34 billion.
The company’s executive vice president and treasurer Ben Oren said Qurate has debt coming due in 2025, which will be “managed by either the revolver or free cash flow.” Debt that’s due in 2026, 2027, and 2028 could be managed the same way but as the “business continues to deliver metric improvement,” the likelihood increases that the company will look to refinance its debt in 2025 or early 2026, he said.
For the second quarter ended June 30, Qurate posted net income of $20 million versus net income of $107 million in the same year-ago quarter. Total revenue was down 9.1 percent to $2.41 billion from $2.65 billion. Qurate also said that adjusted OIBDA (operating income before depreciation and amortization) for the quarter was $271 million versus $262 million for the same year-ago period. The company uses OIBDA as its standard metric to show operating performance. In prepared remarks, Rawlinson said the company grew adjusted OIBDA for the “fourth consecutive quarter.”
By division, revenue at QxH for its QVC and HSN operations fell 4 percent to $1.56 billion. Overseas, its QVC International division posted a revenue decline of 5 percent to $576 million. And its Cornerstone division—the catalog banners Ballard Designs, Frontgate, Grandin Road, and Garnet Hill—saw sales decline 14 percent to $273 million due primarily to softness in the home categories.
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