QVC: Usual pattern; Low overall US Growth, but higher mobile & web growth; Amazon's possible entry threatens status quo

Tom Paine

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QVC Group (QVCA) reported its results for the 3rd quarter 2015 on this past Wednesday.

QVCA (NASDAQ: QVCA) consists of West Chester-based QVC's worldwide businesses, about 38% of HSN, and 22% of the equity in TripAdvisor.

QVC US revenue increased 4% to $1.4 billion in the third quarter, while operating income grew 5%. QVC.com revenue (originating from the website) as a percent of total US revenue increased to 48%; QVC US mobile penetration accounted for 52% of QVC.com orders. Overall, QVC's US web sales grew 15%. The acquisition of Zulily closed at the completion of the quarter, so its results were not included in QVCA results.

However, due to unfavorable cuurency fluctuation, according to QVCA, QVC's consolidated worldwide revenue decreased 1% in the third quarter to $2.0 billion. International revenue decreased 10%.

While the growth in ecommerce and mobile transactions is important and necessary, some percentage of those orders are simply replacing busineess from existing customers rather than coming from new customers. Even if it were all new revenues, it would take quite some time before QVC might emerge as a growth company given the continued detorioration of its older (mostly telephonic) orders base.

"There's been no growth in the number of consumers shopping by television in three years. The majority of their business is repeat customers, but the number of new viewers isn't growing," said Britt Beemer, chairman and CEO of America's Research Group, a retail consulting agency, as quoted by the Tampa Bay Times.

Entrance to QVC headquarters /
Pennsylvania Center
for the Book)

But QVC has been on a well-orchestrated PR campaign recently, seemingly aimed more at the financial community. Besides the Zulily acquisition, they've also been touting a new QVC app on Apple TV , and there was also a well-timed feature in the Washington Post, among other articles.



But the news that sent the closely knit home shopping industry into overdrive was a well-substantiated report by Seattle-based GeekWire posted on October 28 outlining Amazon's plans to enter the market. Obviously Amazon sees TV shopping as one outlet among numerous ecommerce buying possibilities, but its unclear whether Amazon could bring either the technology or showmanship need to increase TV shopping's percentage of the overall ecommerce spend.

There has even been speculation, far-fetched at this point, that Amazon may eventually try to acquire QVC.

Despite its slow growth, QVC has been very good at generating cash flow. That has given it a current market valuation in excess of $19 billion. Actually, QVCA was created as one of Liberty founder & Chairman John Malone's tracking stocks, which help investors focus on a company or group of companies with distinct characteristics, and maybe gives management more freedom to manuever.

One thing executives emphasized in the earnings call - yes, QVCA has its own earnings call now (transcript courtesy of Seeking Alpha) - is the work its put into making its software more responsive and personalized. Personalization often refers to Monetate, though QVC has been working with Monetate for several years now.