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QVC parent company Qurate Retail sees strong Q2 revenue gains

Yahoo Finance’s Brian Sozzi and Alexis Christoforous break down Qurate Retail’s latest earnings report with Qurate Retail CEO Mike George.

Video Transcript

ALEXIS CHRISTOFOROUS: Qurate Retail, that's the owner of QVC, HSN, Zulily, and the cornerstone brands is out with its second quarter earnings report. Revenue up 10%, e-commerce growing close to 20% as we all continue to shop online during this pandemic. Let's bring in Qurate CEO, Mike George. Good morning, Mike, and good to see you. I would love to know what these numbers are in terms of just pure viewership for QVC and HSN during the pandemic, and does it continue to grow?

MIKE GEORGE: Good morning. It's great to be with you. And we were excited with a very strong quarter really across all of our business units, all of our brands, in every geography in which we operate. And certainly, underneath that growth, to your question, was a real strength in viewership engagement on our QVC and HSN platforms, although also excited by double digit growth that Zulily and our cornerstone brands as well.

So, for us, it's a picture of a stay at home consumer. She's definitely spending more time online. She's definitely spending more time on TV, and credit to our team. I think we were able to engage her, inspire her as she was looking for ways to be distracted from the bad news of the day.

And so we really saw a nice movement, nice growth in TV homes viewing, QVC and HSN networks, nice growth in visitors online. And I think we can sustain that kind of growth, not necessarily at the same level as Q2, but we seem to be in the new phase that's a little more stable, a little more consistent. And that new phase, even with the economy reopening, still reflects someone who is spending more time at home, maybe a little more hesitant about going into brick and mortar retail. And so we've been pleased to see continued growth here at the start of quarter three.

BRIAN SOZZI: Mike, I was surprised to see sales from your best customers, which you define as purchasing more than 20 items a year, sales declined modestly in the second quarter. How do you explain that, and what do you have to do to get that customer base spending again?

MIKE GEORGE: Yeah, we're really fortunate at QVC and HSN to have these incredibly loyal customers. It's-- it's statistically true that once a customer makes three or four purchases from us, she'll be a customer for life. And so we have this huge cadre of best customers. They make more than 20 purchases a year, but on average, they make about 70 purchases a year. Really dynamic base of customers.

Those customers buy a lot of fashion product, and right now, people aren't buying more and more clothing, they're not buying footwear, and so her purchases in those categories declined. But at the same time, her purchases of our food offerings, or home office, home fitness, many other categories were up, just not enough to offset that underlying pressure in fashion.

So the good news for us is the best customer is still with us. She's still increasing her spending in many areas, but quite frankly, we're going to have to live through this down cycle in fashion. It'll probably be with us for a while as we move through various stages of the pandemic.

And have no doubt, she'll resume her purchases at some point. But in the meantime, we've been able to still post good top line growth because of this enormous surge in new customers, up 60% to 70%, reactivated customers, occasional customers. So a lot of strength in that part of the customer file.

ALEXIS CHRISTOFOROUS: And Mike, I like you refer to your customer as she. Sounds right because you've got between 85% and 90% of your customer base is female. I see that you're seeing this shift in consumer buying away from apparel and more sort of home goods and cooking type items. But talk to me about being able to fulfill that demand. What have your fulfillment centers been like? What is the shipping situation been looking like for you?

MIKE GEORGE: It has been a real challenge, and we haven't-- we're not proud, quite frankly, of the service levels we've been offering, although we're trying everything we can to get products to our consumers in a timely way. But the combination of the surge in demand coupled with taking very stringent safety protocols in our fulfillment centers has just impacted our ability to move the products out at the pace we would like to. Coupled with the fact that the large, large carriers, like UPS and USPS, are also overloaded. But we put an extraordinary focus on team safety, give all team members the option to stay home, even with partial pay, and so we've had reduced staffing in our fulfillment centers. We eliminated all productivity requirements.

So things are moving a little more slowly there to make sure everyone is safe. But we feel like we're gradually catching up. So we're a couple of days longer in shipping lead times than we'd like, but I would say over the next few weeks, we actually think we'll probably be largely back on track, although still a little bit of pressure in the third party carriers. So something I think we'll be fighting all year, but I think we're past the worst of it.

BRIAN SOZZI: Mike, I have 30 seconds left. Let me-- put on your other hat for a minute. You're also the Chief of the National Retail Federation. And news came out yesterday that Amazon might be turning JC Penney stores into fulfillment centers. Does that save the mall? Does that keep the mall relevant in America?

MIKE GEORGE: You know, I think it's too early to speculate on that specific move, but I just, you know, to me, it's-- it's a wonderful reflection of this innovative industry. You know, every store has now become a mini fulfillment center and a lot of stores made it through the pandemic by using their stores as curbside pickup facilities. So I think you see this continued blend of offline and online. And so I guess having the Amazon fulfillment center as right in the mall is maybe the next logical step in this blurring of the boundaries.

I think retail will survive. Retailers are incredibly innovative. They're incredibly responsive to customer needs. You look at the level of innovation delivered by brick and mortar retailers in the last few months to try to navigate this crisis, it's really extraordinary. And I think that's just another step in that-- in that journey.

ALEXIS CHRISTOFOROUS: All right, Mike George, CEO of Qurate Retail. Good to see you this morning.

MIKE GEORGE: Good to see you. Thank you.