Qurate Retail(US:QRTEA)2023-05-05 17:35Financial Data and Key Metrics Changes - Adjusted OIBDA declined by $86 million or 38%, with the adjusted OIBDA margin decreasing by 470 basis points [3][60] - Free cash flow improved by $174 million year-over-year, mainly due to increased cash from operations reflecting working capital improvements [21][95] - Total capital expenditures were $54 million in Q1, with $38 million spent on renewals of TV distribution contracts, an increase of $36 million over the prior year [97] Business Line Data and Key Metrics Changes - QxH revenue declined by 5%, primarily due to lower unit volume, but was partially offset by a 2% growth in average selling price [50][54] - Cornerstone revenue declined by 13% in the first quarter, but grew 4% on a two-year basis [8] - Zulily revenue declined by 17%, mostly due to lower unit volume and reduced shipping and handling revenue, although average selling price increased by 9% [90] Market Data and Key Metrics Changes - QVC International revenue declined by 3%, primarily due to lower unit volume and reduced shipping and handling revenue [5] - QVC Japan experienced flat revenue, impacted by high inflation and reduced viewership [5] - The largest European markets, Germany and the UK, saw mid-single-digit declines attributed to soft consumer sentiment due to historic inflation [9] Company Strategy and Development Direction - The company is focused on Project Athens, a three-year plan aimed at establishing revenue stability, margin expansion, and incremental free cash flow generation [19][26] - There is a strategic pullback on electronics airtime to focus on higher-margin fashion categories [54] - The company is enhancing its merchandise strategy, focusing on higher-priced subcategories and improving customer service metrics [22][23] Management's Comments on Operating Environment and Future Outlook - Management noted that the retail environment remains highly promotional, with elevated inflation and low consumer sentiment [14][19] - There is an expectation for material improvement in profitability in the second half of the year, driven by pricing and merchandising efforts [21][70] - Management acknowledged the impact of the Rocky Mount Fire on customer satisfaction and is focused on reactivating customer groups [27][28] Other Important Information - The company has eliminated approximately 400 positions, expected to generate $60 million in annual run-rate savings [24] - The average spend per existing customer increased to $1,500, with existing customers generating nearly 90% of sales [28][29] - The company is actively renegotiating import freight contracts, resulting in a 30% year-over-year decline in rates [25] Q&A Session Summary Question: Can you discuss the cadence through the quarter and any insights for April? - Management noted moderate levels of improvement throughout the quarter, with consistent performance at QVC U.S. and QVC International, and some improvement at HSN [116] Question: How do you expect to achieve stable revenue and double-digit OIBDA growth this year? - Management expressed confidence in achieving stable revenue and double-digit OIBDA growth, citing improvements in pricing and merchandising strategies [70][71] Question: What percentage of sales comes from your best customers and what is the retention rate? - Approximately 90% of sales come from existing customers, with strong retention rates in line with historical trends [85] Question: How are you planning to address the 2024 and 2025 maturities? - The company plans to use a combination of cash on hand and borrowings under the revolver to address upcoming maturities [125] Question: Can you provide details on the $50 million in savings mentioned? - The $50 million in savings is expected to come primarily from QxH, related to the reduction in force [130]