Earnings call transcript: QVC Group’s Q2 2025 results show revenue decline

QVC Group’s second-quarter earnings call revealed a significant decline in revenue, impacting its stock price. The company reported a 9% decrease in total revenue, leading to a 10.57% drop in its stock price to 3.47 USD post-earnings. However, the stock has since recovered by 16.37%, closing at 3.23 USD. According to InvestingPro analysis, the stock appears undervalued at current levels, though it’s worth noting its high volatility with a beta of 2.74. The market reaction reflects investor concerns over declining traditional revenue streams and macroeconomic pressures.

Key Takeaways

• Total revenue declined by 9% in constant currency.
• Stock price dropped 10.57% post-earnings but later recovered 16.37%.
• Strategic focus on social and streaming platforms shows growth potential.
• Significant cost reduction efforts targeting 100 million USD in OIBDA.
• High net debt remains a concern at 4.7 billion USD.

Company Performance

QVC Group’s performance in Q2 2025 was marked by declines across its major revenue streams, including an 11% drop in QXH revenue and an 8% decline in Cornerstone revenue. The company’s shift towards social and streaming platforms has shown promise, with a substantial increase in new customers from TikTok Shop and growth in streaming users. The overall financial picture remains challenging, with significant debt and declining traditional revenue streams. InvestingPro subscribers can access 13 additional key insights about QVC Group’s financial health and growth prospects through exclusive ProTips.

Financial Highlights

• Revenue: Declined 9% in constant currency.
• Net debt: 4.7 billion USD.
• Free cash flow: Negative 156 million USD compared to a 164 million USD source last year.
• Leverage ratio: 3.9x, below the 4.5x covenant threshold.

Earnings vs. Forecast

QVC Group’s revenue fell short of the 2.4 billion USD forecast, with declines across multiple segments. The miss reflects ongoing challenges in the company’s traditional business areas and macroeconomic pressures.

Market Reaction

The company’s stock experienced a volatile reaction, initially dropping by 10.57% post-earnings but later recovering by 16.37%. This volatility indicates mixed investor sentiment, balancing concerns over revenue declines with optimism about strategic shifts towards digital platforms.

Outlook & Guidance

QVC Group is focusing on diversifying its sourcing to reduce tariff dependencies and plans to continue expanding its social and streaming presence. The company is evaluating financial and strategic alternatives to strengthen its position.

Executive Commentary

CEO David Rollinson emphasized the company’s commitment to creating opportunities for shoppers and highlighted the growth of social and streaming revenues. Executive Chairman Greg Maffei noted the balance between cost focus and investment in growth businesses.

Risks and Challenges

• Declining linear TV viewership impacting traditional revenue.
• High net debt could limit financial flexibility.
• Macro-economic challenges affecting consumer confidence.
• Suspension of dividends may concern investors.
• Competitive pressures in the digital shopping space.

Q&A

During the earnings call, analysts questioned the impact of new customer acquisition through TikTok Shop and the stability of existing customer spend. The company addressed concerns about tariff impacts and highlighted the resilience of its international business.

Full transcript - QVC Group Inc (QVCGA) Q2 2025:

Conference Operator: Greetings. Welcome to QVC Group’s Second Quarter twenty twenty five Earnings Call. It is now my pleasure to hand the call over to Jessica Donati.

Jessica Donati, Investor Relations, QVC Group: Thank you, and good morning. Before we begin, we’d like to remind you that this call includes certain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10 ks and 10 Q filed by QVC Group and QVC with the SEC. These forward looking statements speak only as of the date of this call, and QVC expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statement contained herein to reflect any change in QVC Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please note that we have published slides to accompany the earnings release.

On today’s call, we will discuss certain non GAAP financial measures, including adjusted OIBDA, adjusted OIBDA margin, free cash flow and constant currency. Information regarding the comparable GAAP metrics along with required definitions and reconciliations, including preliminary note and schedules one and two, can be found in the earnings press release issued today or our earnings presentation, which are available on our website. Today speaking on the earnings call, we have QVC Group President and CEO, David Rollinson QVC Group CFO and CAO, Bill Wofford and QVC Group Executive Chairman, Greg Maffei. Following today’s presentation, we will address questions that were submitted in advance of the call. There will be no live Q and A session.

Now, I’ll hand the call over to David Rollinson.

David Rollinson, President and CEO, QVC Group: Thank you and good morning everyone. We appreciate you joining us and your continued interest in QVC Group. Coming off a challenging Q1, we continue to manage through what has proven to be a difficult macro environment in Q2. Namely, we continue to experience declining linear TV viewership as well as ongoing volatility in consumer confidence. QXH minutes viewed declined 15% in the second quarter.

Declining consumer confidence in the earlier part of the second quarter was primarily driven by international economic policies and geopolitical events. Our implementation of key initiatives to strengthen our capital structure for the long term remains ongoing. At the same time, we are acutely focused on moving the business forward and implementing our win strategy to drive the future of live social shopping. To this end, we continue to advance the number of cost cutting efforts and accomplish various milestones this quarter. In late June, we successfully completed the transition of HSN’s operations to Studio Park in Westchester, Pennsylvania, bringing our five U.

S. TV channels across HSN and QVC under one roof. In total, we now feature fifty two hours of linear content a day. This will not only generate cost reductions, but is also a major milestone in our win growth strategy and a testament to the dedication of our team. With a single headquarters for QVC and HSN, we believe we are in a much stronger position to efficiently create content for multiple platforms.

To keep our customers engaged through this transition, particularly for our avid and elite customers, HSN launched Hello HSN PA, a month long marketing campaign across all of our touch points. We brought our customers with us on this exciting journey through moving theme programming and deals, shout outs in our top rated shows, behind the scenes social clips with our hosts and much, much more. Hello HSNPA culminated in a blowout housewarming party in late July. More than 130 customers joined our host and guest in person at our new Studio H in Westchester and we broadcast the party live to the entire HSN community. As HSN President, Stacy Bo told customers in an open letter, HSN may have a new address, but the HSN they know and love isn’t going anywhere.

The fun is here to stay. We also welcomed 11 of our HSN hosts to Studio Park and three others will commute to Pennsylvania for the remainder of the year. In addition, we continue to take strategic steps to diversify our sourcing and reduce our dependence on any single country and related tariff pressures. During our last call, we mentioned monitoring the tariff impact, being prudent about placing new orders and canceling certain orders with high tariff countries, actively sourcing from new countries, negotiating with vendors to share any tariff impacts and potentially taking price action when necessary. In June, we launched Christmas in July, a large home decor event with items largely sourced from countries impacted by tariffs.

Although the tariff rates vary, we did not see significant impact to demand for items with tariff price adjustments. Our longer term strategy of sourcing diversification continues. And as we shared last quarter, we are still targeting that no single country will represent more than one third of our sourced goods in The U. S. By the end of the year.

As a reminder, at the 2024, we committed to finding an additional $100,000,000 worth of OIBDA opportunities by examining all areas of spending across the company. In Q2, we saw the favorable impact of our organizational changes in our expenses. We also saw the benefits from our IT outsourcing initiative, allowing us to reinvest in marketing and technology that drives our growth businesses. Also, we completed the operational move of HSN including standing up a new content organization and merchandise function. Returning our company to growth continues to be difficult as certain macroeconomic challenges persist.

It will take time to ramp up. However, we believe the current strategy we have in place, our win growth strategy is the right one and is already delivering results. I’d like to walk through some of the wins we saw just this quarter and why we’re excited for what is to come. Our social and streaming channels continue to grow and we estimate that the percentage of QXH revenue that was attributable during Q2 through these platforms is approaching double digits. This is an increase from what we saw in Q1.

Social and streaming revenue experienced over 30% growth versus 2024. As we will discuss more fully below, Q2 experienced substantial growth in new social customers with well over 100,000 new customers finding us through TikTok shop alone. In streaming, we continue to expand content and distribution. QVC and HSN recently joined Filo, a popular live TV streaming service with approximately 1,300,000 paid subscribers. This launch reflects our strategic initiative to drive live shopping content to everywhere customers are spending their time.

We also recently launched an ad supported version of QVC two on several leading fast platforms. Additionally, Season two of Busy This Week on streaming is off to a strong start. Season two reached over 1,000,000 households, 80% of which were new. In fact, in Q2, streaming monthly active users grew over 80% to nearly 1,500,000 users and streaming minutes watched grew 25% in the quarter. Building off the strategic agreement we discussed last quarter with TikTok, we hosted our first TikTok sorry, first, we hosted our first TikTok shop Super Brand Day, kicking off the second year of the Age of Possibility.

Over 80 of our top affiliate creators joined us for the event, along with 40 of our Q50 ambassadors, including Hoda Kotb, Jenny Garth, Billie Jean King and more. The event was our highest viewed and most engaged QVC hosted live stream today. We are integrating TikTok creators into customer events like QVC’s Foodie Fest and are seeing the success of our push into the ever crucial streaming and social businesses. We now have 8,400,000 followers across all of our social media accounts, a 700,000 increase from last quarter. And we’ve uploaded our full QVC catalog into Meta Shop for a seamless shopping experience on Facebook and Instagram.

Notwithstanding the successful accomplishments we achieved this past quarter, given QVC Group’s unique business model, certain elements of the tougher macro environment continue to apply pressure on our business. Total revenue declined in Q2 by 9% in constant currency. QXH revenue declined 11%, QVC international revenue declined 3% in constant currency and Cornerstone revenue declined 8%. As a result of top line softness, consolidated adjusted OIBDA declined 19% in constant currency in the second quarter, an improvement from the first quarter, which was down 31% versus last year. While these results are not yet where we want them to be, we are working to remain agile as we navigate the current landscape.

Drilling down on our capital structure, thanks to the hard work of everyone at QVC Group, over the past few years, we’ve made meaningful progress in reducing our net debt by over $1,500,000,000 since the 2021. Our goal is to create more flexibility for our transformation and put ourselves on the strongest and most sustainable path forward. Improving gross margins and aggressively managing costs also continue to be top of mind. As you can see on slide eight in our presentation, on a trailing twelve month basis, customer declined on a sequential basis with a decrease of approximately 3% versus March 2025. Please note, this does not include any new customers purchasing through our TikTok shop.

Existing customers continue to purchase at healthy levels, spending on average $16.22 dollars and purchasing 31 items in the twelve months ended June 30. And at QVC, our best customers who buy 20 or more items annually also continue to purchase at very attractive levels. In the twelve months ending June 30, they bought 76 items and spent $300.09 $90 on average, up approximately 1% versus last year. Total QXH customer count declined 12% in the quarter, driven by a 10 decrease in existing customers, a 21% decrease in new and a 16% decrease in reactivated customers. The decline in linear TV households continues to put pressure on our customer count year over year.

Our traditional customer reporting does not include any new customers who purchase from our TikTok shop. We estimate that well over 100,000 new customers purchased through our TikTok shop in the second quarter. There are still many unknowns in this relatively immature business. We continue to grow our catalog and improve our technology and we expect to have more robust customer level analytics and reporting in the coming quarters. Notably, when we when the estimated new TikTok shop customers are now added to traditional customer reporting, we saw the number of new customers grow substantially year over year and a halving of the rate of decline in the overall customer fall.

We believe this is a strong and early sign of success in our social strategy. When we look within our categories, we saw declines in all categories with the exception of electronics compared to last year. Although apparel was down, we experienced strength from several of our core apparel brands including Kim Gravel, Denim and Company, Diane Gillman and Logo by Lori Goldstein and also saw success in accessories driven by handbags and luggage. The Christmas in July event we kicked off in June through strong sales with customers responding to our food offerings along with new items from favorite brands like Valerie Farhill, Bethlehem Lights and HomeWorks by Slapkin. Our home business was down 12%, but we saw success in our private label bed and bath, home environment and smart home categories.

Tariffs were a factor in our inventory mix and impacted deliveries and product availability. Moving to QVC International, we saw revenue decline 3% in constant currency compared to prior quarters of broadly stable revenue performance. We continue to experience top line pressure in Japan, but revenue in our European markets was only down approximately 1%. Total customer count declined 4% in the quarter, driven by a 3% decrease in existing customers, a 5% decrease in new customers and an 8% decrease in reactivated customers. Finally, for our Cornerstone brands, revenue declined 8% in the second quarter, an improvement from our first quarter results driven by our transformation efforts.

To wrap up, while some of the uncertainty we experienced last quarter has persisted in Q2, we remain guided by our confidence in our business, strategy and leadership. We continue to do what we do best, creating an opportunity for shoppers to explore, dream and connect. We’ve evolved with the changing consumer preferences towards newer channels and platforms like streaming, TikTok and Facebook and are now beginning to see those efforts positively impact our business. We will continue to be a class leader here, while also tightly managing costs and the balance sheet. Now I’ll turn the call to Bill to review Q2 financial results for each of our businesses.

Bill Wofford, CFO and CAO, QVC Group: Thank you, David, and good morning, everyone. Unless otherwise noted, my comments compare financial performance for the three months ended 06/30/2025 to the same period in 2024. Starting with QXH. Revenue declined by 11% due to lower unit volume and less shipping and handling revenue with a partial offset in favorable returns rate and higher average selling price. From a category perspective, home revenue decreased 12% driven by reduced demand in culinary and pressure in many of our today’s special value events.

Apparel revenue decreased by 9% consistent with what we experienced in Q1. Beauty revenue fell by 13% in Q2, although we did see wins in brands like Bare Minerals, Elemis and Toucha. Accessories experienced another challenging quarter with a 15% decline driven again by footwear and loungewear. Electronics grew 4% driven by smart home, computers, audio and gaming. Operating loss was primarily driven by a $2,400,000,000 non cash impairment charge related to goodwill and trade names.

Adjusted OIBDA margin contracted 165 basis points. Gross margin declined approximately 15 basis points with higher product margins and favorability in obsolescence more than offset by fulfillment pressure and sales deleverage. Product margins increased by 50 basis points driven by better return rates partially offset by lower shipping and handling revenue and initial margin. Obsolescence favorability of 25 basis points is driven by the overlap of an abnormally high balance in Q2 twenty twenty four. Fulfillment expenses were unfavorable 90 basis points due to increased freight rates and sales deleverage.

On an aggregate dollar basis, operating expenses decreased 13% and SG and A expenses were flat. Operating expenses decreased $16,000,000 largely driven by lower commissions. SG and A expenses were flat driven by lower personnel costs offset by higher marketing costs. SG and A was unfavorable by approximately 175 basis points due to sales deleverage. Moving to QVC International.

My comments will focus on constant currency results. Revenue declined 3% reflecting a 3% decrease in units shipped and a 2% decrease in average selling price partially offset by a favorable returns rate. From a category perspective, QVC International experienced sales growth in apparel while home and accessories categories were flat and Beauty and Jewelry and Electronics declined. Germany net revenue increased 1%, while Japan revenue declined 7% and The U. K.

Declined 1%. Adjusted OIBDA decreased 8% and adjusted OIBDA margin declined 60 basis points. Gross margin decreased 40 basis points due to sales deleverage and fulfillment pressure, partially offset by product margin gains. Fulfillment pressure is due to higher variable wage rates in Europe. Product margin strength was due to favorable returns rate offset by initial margin pressure.

Operating expenses were flat and the margin was unfavorable due to sales deleverage. SG and A expenses decreased two percent due to lower personnel expenses. SG and A margin was unfavorable by approximately 10 basis points due to sales deleverage. Moving to Cornerstone. Revenue declined 8% in the quarter as we continue to experience soft demand for Furniture and Decor and from continued challenges in the home sector.

Adjusted OIBDA margin decreased approximately 30 basis points, driven by cost for outside services related to Cornerstone’s transformation plan and sales deleverage partially offset by product margin fulfillment. Turning to cash flow and the balance sheet for the quarter. In the 2025, free cash flow was a use of $156,000,000 compared to a source of $164,000,000 last year. The decrease in cash flow was primarily due to a reduction in cash provided by operations and higher payments for TV distribution rights. As a reminder, our TV distribution payments fluctuate year over year depending on renewal cycles.

Looking at the QVC Group Inc. Debt profile. As of 06/30/2025, net debt was $4,700,000,000 and the QVC Group revolver had $1,925,000,000 drawn. QVC Group had total cash of $897,000,000 of which $330,000,000 was at QVC Inc, dollars 200,000,000 was at Liberty Interactive LLC and $262,000,000 was at QVC Group. Our leverage ratio as of 06/30/2025 as defined by the QVC revolving credit facility was 3.9 times excluding Cornerstone compared to our maximum covenant threshold of 4.5 times.

Please note that covenant OIBDA includes the adjusted OIBDA of QVC Inc. As Cornerstone was removed as a borrower under QVC’s credit agreement as of April 1. In light of the numerous macroeconomic factors and current leverage levels as we previously announced on 05/23/2025, the Board of Directors unanimously decided to suspend payment of our quarterly dividend for preferred stockholders. Additionally, to further increase our financial flexibility, we made the decision to borrow $975,000,000 of the funds available on our revolving credit facility in July 2025. These decisions reflect the Board’s focus on and commitment to taking the necessary steps to preserve cash and enhance long term value for our business, customers, partners and investors.

As you heard from David, we are focused on taking the necessary steps to strengthen our capital structure. We are in the process of evaluating a range of proactive financial and strategic alternatives. This review is ongoing and no decisions have been made at this stage. We will provide updates if and when there are material developments that warrant further communication. Finally, as we previously announced on 05/16/2025, our Board approved a one for 50 reverse stock split of the company’s Series A common stock and Series B common stock.

The reverse stock split was approved by stockholders at our annual meeting on 05/12/2025 and took effect after market closed on 05/22/2025. On May 27, the company elected to have QVCGB suspended from trading on the NASDAQ Capital Market and QVCGB began quotation on the over the counter market on May 28. Finally, on 06/09/2025, we received notice that our Series A common stock had regained compliance with NASDAQ and as a result QVCGA and QVCGP stocks continue to trade on NASDAQ. Now I’ll turn the call over to Greg.

Greg Maffei, Executive Chairman, QVC Group: Thank you, Bill. This was another challenging quarter for QVC Group and we aren’t where we want to be. We remain unable to offset the declines in linear in a challenging environment, but we were pleased to see the growth in social and streaming. As I said, you’ve heard it from the above, we are making good progress in social and streaming and we continue to lean in here. We are balancing execution and a cost focus with investing in this growth businesses.

We are also working on our capital structure and our balance sheet and we are proactively evaluating financial and strategic alternatives. We were pleased to regain compliance with NASDAQ. And with that, we’ll address the questions we received prior to the call. Thank you, operator.

Jessica Donati, Investor Relations, QVC Group: Thank you, Greg. As I mentioned before, we received a number of questions submitted prior to the call. Our first question is for David and comes from Carla Casella at JPMorgan. David, can you share some trends in new customers versus reactivated customers versus core customers?

David Rollinson, President and CEO, QVC Group: Yes. Thank you for the question. As I mentioned during the call, our traditional customer count does not include any new customers we have purchasing through TikTok shop. Our trailing twelve month customer count declined 3% versus Q1 and versus last year our total customer count was down about 12%. But as I mentioned before, we know that over 100,000 new customers bought from us through our TikTok shop and comparing that to Q2 twenty twenty four that would improve our new customer count to plus 7% versus the reported negative 21%.

We expect that social will continue to help drive new and reactivated customers like we saw in Q2. A few other things I’d call out. We are seeing some stability in average customer spend. Best customer spend is up 1% this quarter and existing customer retention is also up improving about 100 basis points versus last year.

Jessica Donati, Investor Relations, QVC Group: Thank you. Next question also for you David. Can you share the percentage of sales coming from the core business? And has that changed?

David Rollinson, President and CEO, QVC Group: Sure. We estimate that social and streaming revenue is approaching low double digits as a percentage of QXH revenue. That obviously still leaves 90% of revenue in QXH driven by core linear and digital. However, our social and streaming businesses grew over 30% in Q2 versus last year and is now a larger percentage of QxH revenue than they were in the first quarter. We’ve and so I would say less is coming out of our core, given just some of the trends that we are seeing there.

And then with the significant growth in social and streaming, we would continue to expect to see a shift with increasingly more social and streaming revenue as a percentage of total revenue over time.

Jessica Donati, Investor Relations, QVC Group: Great. Thank you. And our final question is a two part question around tariffs. First, did you see can you share the tariff impact expected for fiscal twenty twenty five? And what are your top ways to mitigate tariffs?

And then second follow on, did you see any tariff impact in the second quarter? And are your vendors passing on increased tariff costs?

David Rollinson, President and CEO, QVC Group: Great. A lot there. We’re monitoring tariff impact. We’re taking a lot of the steps that we’ve discussed. We’re being prudent about placing new orders and canceling certain existing orders from high tariff countries.

We’re managing sourcing. We’re actively negotiating with vendors. And in some circumstances, we’ve implemented price changes. We’re still working towards our target that no single country will represent more than a third of our sourced goods in The U. S.

By the end of the year. That is a big change from where we were, which is more than half of our goods coming from a single country. And so that’s a major effort. And we think that’s one of the major that diversification will be a major source of stability going forward. But we continue to see volatility.

You’ve seen lots of changes even in the last few days. We saw the first real impact of tariffs in our Christmas in July event, which kicked off in June. We completed an inventory assessment. For that, we limited some orders and buys and then we also took some price actions on the things we were selling during the Christmas in July event. As I said, tariffs will continue to be fluid and we continue to adjust in changes in rates, including to the most recent ones.

But what was encouraging about the Christmas in July event is we did not see big drop offs in demand, in response to the price changes that we made in that event. And so it gives us some confidence about our ability to navigate continue to navigate our way through some of the current tariff challenges. And last comment I have is that we should also remember that our international business had minimal tariff impact. And I would just remind everybody not to forget about that business. Our international business makes up over 25% of our revenue and is more insulated from some of the impacts of the tariffs.

With that, I think that is all the questions. I want to thank you again for your interest in the QVC Group. And I want to thank you for your interest in our results and look forward to continuing to share our story and continue to visit as we make more progress on this transformation.

Conference Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.

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