Yahoo Finance Qurate Retail Inc (QRTEA) Q1 2024 Earnings Call Transcript Highlights: Strategic Growth and ...
Gross Margin Expansion: Increased by approximately 400 basis points, marking the fourth consecutive quarter of expansion.
Adjusted OIBDA Growth: Grew 45% as reported, continuing a trend as the third consecutive quarter of growth.
Free Cash Flow: Improved for the fifth consecutive quarter of year-on-year improvement.
Revenue Trends: Declined in line with the overall discretionary retail market, with uneven performance in seasonal products.
New Customer Growth: Increased by 23% in Q1, marking the third consecutive quarter of new customer growth.
Streaming Business Growth: Revenue, total minutes viewed, and monthly average users all increased well into the double digits in Q1.
QVC International Revenue: Declined slightly by 1%, with performance led by operations in the U.K.
Cornerstone Revenue: Declined due to soft housing starts and consumer demand for home furnishings.
Cornerstone Gross Margin: Grew 410 basis points fueled by lower supply chain costs.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Qurate Retail Inc reported a sustained gross margin expansion of approximately 400 basis points, marking the fourth consecutive quarter of expansion.
Consolidated adjusted OIBDA grew 45% as reported, representing the third consecutive quarter of adjusted OIBDA growth.
Free cash flow improved for the fifth consecutive quarter of year-on-year improvement, demonstrating continued financial health.
The launch of the QVC Age of Possibility campaign aimed at empowering women over 50 has shown early success, with a significant increase in new customer count following the event.
Qurate Retail Inc's streaming business is experiencing robust growth, with revenue, total minutes viewed, and monthly average users all increasing well into the double digits in Q1.
Negative Points
Revenue at QxH declined in line with the overall discretionary retail market, impacted by inflation and interest rate uncertainty.
Uneven performance in seasonal product categories such as gardening and spring apparel due to a colder start to spring and changing consumer buying patterns.
Beauty revenue declined at QVC, despite strength in beauty at HSN, indicating challenges in certain product segments.
Cornerstone revenue declined due to soft housing starts and consumer demand for home furnishings, reflecting broader economic challenges.
Despite overall growth, QVC International's Q1 revenue declined slightly by 1%, led by a decrease in Germany.
Q & A Highlights
Q: Can you provide more details on the average spend of customers, particularly the difference between new, existing, and reactivated customers? A: David L. Rawlinson, President and CEO of Qurate Retail, Inc., explained that best customers, who purchase over 20 items a year, represent about 17% of the customer count but account for 76% of sales, with their average spend up about 7% year-over-year. Existing customers, who make up about 50% of the customer count and 90% of sales, spent over $1,600 in the quarter, up 10%. New customers generally resemble traditional customers but are increasingly coming through digital channels. The company is observing these new customer behaviors closely as they continue to attract them at scale.
Q: What is the current status of Project Athens and what future impacts do you expect from it? A: Billy Wafford, CFO of Qurate Retail Group, Inc., noted that Project Athens continues to deliver benefits, particularly in cost of goods sold and fulfillment initiatives. These efforts are expected to positively impact gross margins throughout the year and into 2025. The company is also focusing on growth initiatives that should start to significantly contribute in the coming years.
Q: How is the streaming segment performing in terms of viewer minutes and customer spending compared to traditional linear TV? A: David L. Rawlinson mentioned that streaming now accounts for a high single-digit percentage of total viewer minutes and is growing rapidly. While it's challenging to isolate the spending habits of streaming-only customers due to their multi-platform behavior, there is nothing in the profile of streaming customers that diminishes the company's enthusiasm for the growth potential of this segment.
Q: With the introduction of the Age of Possibility campaign, should we expect an increase in marketing spend? A: Billy Wafford clarified that there would be no significant increase in marketing expenditures due to the Age of Possibility campaign. The company has planned for this initiative within its existing marketing budget, with possibly minor reallocations but nothing that would materially impact overall marketing spend.
Q: What are your expectations for the sales lost in seasonal categories like swimwear and outdoor due to weather impacts? Do you anticipate recovering these sales? A: David L. Rawlinson observed that consumers are purchasing closer to the season and expects that as the weather improves, sales in these categories will pick up. He remains hopeful that these sales are not lost but merely delayed.
Q: Can you discuss the financial strategy regarding the use of the revolver for the 2024 maturity and plans for future debt maturities? A: Billy Wafford explained that the decision to use the revolver for the 2024 maturity was based on timing within the quarter. Looking ahead, the company plans to use cash on hand and the revolver for the 2025 maturities but will continue to assess the capital markets for potentially more favorable financing options as conditions improve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
