(Bloomberg) — QVC host Jayne Brown was jubilant after selling 1,500 units of a size-inclusive duster jacket and maxi dress set.
(Bloomberg) — QVC host Jayne Brown was jubilant after selling 1,500 units of a size-inclusive duster jacket and maxi dress set.
The next item up for sale during her 11 a.m. show on a recent Monday is a jersey keyhole top (also size-inclusive), which Brown touts as “the Botox of fabrics” because it always stays smooth.
Brown’s show on the free-to-air network, which shares parent company Qurate Retail Inc. with the Home Shopping Network, is beamed to millions of homes. The channels make up a niche slice of the shopping industry that’s nevertheless been a cultural mainstay for some 40 years. But home-shopping, sitting at the intersection of two industries in upheaval — entertainment and retail — faces fresh existential threats.
Core customers are aging, and younger ones are increasingly turning to streaming. Supply chain woes created piles of excess inventory, just as consumers tighten their spending in response to inflation. Shares of Qurate have plunged more than 70% this year, and its debt has fallen to distressed levels.
“QVC and HSN are struggling with relevancy,” said Oliver Wintermantel, an equity analyst at Evercore ISI. “Consumer tastes or shopping behaviors are changing.”
Qurate Chief Executive Officer David Rawlinson has implemented a turnaround plan, dubbed Project Athens, designed to focus the Englewood, Colorado-based company on a future in streaming and e-commerce, while cutting costs. The aim is to expand beyond broadcast television and into the multi-billion dollar livestreaming industry to compete with the likes of Amazon Live.
A representative for Qurate declined to comment.
Booms and Busts
Qurate, which counts discretionary goods like electronics and beauty as core sales drivers, enjoyed an early-pandemic sales boom from cooped-up customers. But that momentum quickly faded as in-person shopping returned. Sales last year were below the same period in 2020, and inventories climbed to $1.74 billion as the company struggled to manage supply chain disruptions. A fire last year at one of the company’s warehouses delivered another blow.
The recent pain has sent some of the company’s more than $5 billion of debt tumbling into distress, from prices around par at the beginning of the year. S&P Global Ratings analysts called recent financial results “volatile” in a note that downgraded the company’s credit rating, and said the numbers and ongoing supply chain woes threaten the company’s turnaround goals.
Qurate is seeking to cut down on its inventory in the next 18 months, which is likely to further weigh on results, according to Bloomberg Intelligence analyst Mike Campellone.
For now, the company has sufficient liquidity — including more than $560 million of cash — to address its upcoming debts including first-lien notes due March 2023 and March 2024, according to S&P. Those obligations trade near par.
“We still think the company has adequate liquidity and will be able to address the incoming maturities. Is the debt load an impediment to its turnaround? That’s not the case,” S&P analyst Khaled Lahlo said.
Longer-dated debt holders, however, remain skeptical. The company’s 8.25% notes due 2030 trade around 64.75 cents on the dollar, according to Trace.
As part of the turnaround, the company launched its vCommerce Ventures division, designed to focus on its streaming projects. It’s touted 70% growth in streaming viewership since the beginning of the year, and some 600,000 watchers on online platforms QVC+ and HSN+, which offer recorded shows touting wares like Broadway star Idina Menzel’s Encore apparel line.
And while Qurate’s core audiences may be aging, older customers tend to be more brand loyal. The company should also benefit from a rising number of adults who are looking to fill their time after their children leave home, said Tom Forte, an equity research analyst at D.A. Davidson & Co. who covers Qurate.
“Their core customers will enable them to emerge from the challenges they face today because the demographics are so favorable and because, to the company’s credit, they’ve found a way to manage through these challenges historically,” Forte said. “They have an almost timeless appeal to the empty nester.”
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