Qurate Retail (QRTEA) 26 Feb 212020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Qurate Retail, Inc. 2020 Year End Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded on February 26. I would now like to turn the conference over to Courtnee Chun, Chief Portfolio Officer. ahead. go Please

Thank you.

XXXX. based. through is on Group accompany got available slides constant currency. our today we Maffei. OIBDA, GAAP free published slides Davis; earnings Jeff Greg to found of statements on we and certain These the and release. circumstances that our on to reconciliations, obligation within the Litigation and herein forms our QVC to Retail we Qurate flow presentation, Act statement including XX-Q like measures, of statements any disseminate everyone forward-looking the with this Executive website. Qurate Private and a in Qurate definitions CFO, as Retail earnings we'd will results XX-K in any Reform that These call, or date and the which statements Retail's and cash to are company remind earnings conditions issued call, the only required disclaims of any the adjusted President Retail available Mike those on number which regarding SEC. note release be in X or includes of change begin, speaking our or change events, Retail's materially website. Qurate to and by uncertainties, forward-looking OIBDA preliminary such and call are we the contained the adjusted on Securities Today, press the any with any Please Chairman, could CEO, risks Qurate Before differ George; financial events including forward-looking non-GAAP due mentioned On schedules Actual revisions this with speak expectations filed metrics, meaning thereto, Information to comparable recent including of any X, or reflect and certain updates can expressly margin, or discuss undertaking call, regard along in most note today's earnings

Now over I'll hand call the to Mike.

good Thank everyone. sustained for finish We line to a free Thank and had you, significant year, with our pulling as we activity. growth responded businesses. very the gains our across us in back customer overall We even strategic in and returned stay-at-home flow segments robust and cash shifting pay to We shortages of provide to to long-term today. them grow and and made substantial you joining top strong growth morning, adapt the And grew Courtnee. enhanced management financial events commercial tight strong and benefits. and OIBDA growth capital environment all customers’ our business and new our good needs to rapidly invested with offerings team phase of priorities all shareholders, all the shipment meet keep revenue, agility and members in and product challenges net maintain as team we safe,

culture commitment can their a credit and team recognition full where fostering best focused We we measurable I small Additionally, and community’s our businesses. well-being the Retail am practices a by policies responsibility work. and new Campaign’s nation's is Rights received to do proud members corporate LGBTQ Corporate equality. and benchmarking the backlog innovative publicly to businesses down lock National our This commitments supporting we all phase it a in Small team, with challenged XXXX second announced particularly with inclusion empowerment. service on report Human products COVID-XX, measuring our Foundation, Federation to the as on Spotlight, with Business rating programs such continue related help partnership survey including to XXX% that to entire is support August do our curating to time targets championing and in workplace foremost Index, corporate their Equality their responsibly environment, protecting

at and and share We temporary the member regular bonus has who this we bonus to personal not team In for members resilience this challenges a programs. or past with all are other appreciation, eligible one-time a grappling are end, pandemic team all for brought. the the year, grateful commitment year while demonstrated awarded every special success

Now ability cash QX, grew generated X%. of XX% currency, through turning X% revenue OIBDA dividends we than up the for supporting in X% nearly to more special cash and year, the and constant to for share and in numbers, shareholders flow billion to OIBDA and revenue return year XXX% $X the our We we grew buybacks. free

given more customers X.X business With million last continue We interact the after so consumers record total units and many over. in all a pandemic consumer And now COVID-XX and will this than the the long new the is pushed to year that's online growth and consumers and to fundamental retention across all customers relevance the million for shopping choices, our is of continue QX, the array speaks increase. XX% experiences. have of of customer XX% and of millions in the stickiness to new and and vast added [indiscernible] has to do online platforms behavior. experience We stable long-term markets. shift a year brands powerfully retailers acquisition with X.X believe customers is new rapid new up our

home electronics. we at quarter, that and in note across a two in softness quarters, Qurate we did share steep look as delivered closer businesses, and in growth offset partially in Retail’s accessories down fourth a performance in otherwise, the by beauty the gain all categories, our apparel, in outstanding a prior continued market fashion taking consumer Now decline

reflected Qurate of drivers revenue the that from to and the Excluding quarters growth consumer electronics unique two moderation in QX. are two prior revenue main fourth The increased X% quarter. net

Northeastern season fulfilment centers, quality cutoff Christmas selling. final impacted up a which weekend Firstly, our for a us snow us move costing late delivery, forced to storm guaranteed dates of

chip we shortages, West the by and containers by and backlogs compounded factory These ports. December. Coast vendor in shipping November challenges Asia, were significant rising scarcity product significant shortages with up of delays, had at Second, demand, shortages keeping late in driven

As be these can highly focuses than the last-minute items business key that the featured items assortments, shortages rather key disruptive. always-on day, on for broad, in

up were these While XX% about had QX normally in these represents in pressure the greatest double sales electronics, which normal the of across categories, our over shortages mix. many

meet for As unable we and items, smart home result, audio are demand to tablets, a products.

typically Additionally, and in than terms profile of that the devices, lifetime were such our base subcategories, have we in as unattractive target that given don't strong demographic. an meaningful particularly value intentionally gaming presence margin market, is lower customer a

impact impacted While to OIBDA lower products. growth the significantly our the due on our our revenue electronics it challenges meaningful a was on not growth, margins

the of product to they as XXXX not in believe Looking really as will shortages were be do impact ahead, we significant QX.

to our We will we're product oversight and supply inbound stabilize chain our to of increase expect from sales the vendors. the interim stronger begin actions taking global in

Additionally, year there QxH the are customers growth significantly in strong in smaller drove in decline quarters in electronics much brings that XX% most the of at impressive of customers our electronics share the category as consumer exposure. light mix holidays in season. especially the We of of course reduces in three new new quarter, largest

effective customer presence of coupled Even quality required social reputation, the our who the And of we marketing highly XX% encouraged and TV to the customer quarter highly websites and word by both are and brand service combined reach, power these results our quantity new mouth customers of with the social programs. digital remain highlight of attracting. finding investment our Excluding remainder organic or directly and agents in with or new in customers XX% search going is or organic build marketing the electronics, discipline came our organically. over new performance

a years. back who purchase second Looking first the of acquired customer and at XX% best percentage a just the items joining within it's at similar purchase days, XX days customers their And quarters, the customers the above that’s XX XX year's is third slightly made in to hit new in threshold these least last second of have prior considered rate.

new XXXX, new commerce in We to become in any on we a customers more of So record our company's our have driving our than added business. best advanced priorities history. already strategic year growth in video focused long-term number in who sustainable, global customers customers addition

our relevance, on reminder, passionate daily discovery, for service. customer I'll As themes, joyful expanding few focused five and products community, our value, efforts of these engaging and at QxH compelling a are both International reimagining comment briefly and curating delivering extending digital special and reach a strategic QVC around video priorities.

of passionate both part our our on engaging customer stand community, the to As customer. customer and continue the key invest our retain and increase acquisition, expanding to in enhanced we addressable initiatives base, and of focus and enhance personalization overall development

action based communications personalization included website successfully new audiences, building testing shopper and and such behavior. our Our browsing the content personalized engagement new and programs, to efforts, calls with spend, as TikTok to create increase to customer on YouTube expanding out reach success to email and on advertising

screening leading YouTube which free the We new has reach TV’s streaming the including platforms and only on across displays. LG consoles is gaming app, continue TVs, Time addition relevance smart streaming to Shop QVC apps, YouTube video million channel TV, month, expand tablets, shopping livestream players, than and subscribers. and media last with available more Pluto TV, computers, of the three QVC TV, which and debuted on smart smartphone service, TV

TV XX% see app with to viewers up up over were QVC on-demand in on viewers from live XXXX, XXX% growth on monthly start own HSN. XXXX. the Amazon extensive were strong the original that downloads Downloaded Roku and of XX% integrates monthly continue up Fire and our through We since of content up app and with XX% streaming to average

customer livestream continue with in QX. brands from and priorities our XX% products see sources, strategic offerings, with attractive network interest and strides curate per fulfilment as compelling partner Even support, and up and marketing at in growing on it as day QxH we year-over-year in alike engagement and reach sophisticated values. number in development our also of highly high stored we to relevance The new linear a platforms options, makes homes benefit our to tuning networks, we TV traditional to the shopping of our make service special

helps minority our XX which of jewelry, that thirds entries upcoming home, And exciting brand's from Our with compelling XXXX owners beauty, as us accessories and entrepreneurs new two apparel, in brands across customers the love. know will for stories brands launch. different or virtual Find program, Big From new were from countries owned. find selected XX XXXX electronics women identified we culinary

also premium added year, quarter and many During we brand fourth partners. full the

Estee its MAC, For example, UK relationship in also now Estee offering success, on include Lauder namesake began in this Clinique we brand. with the close Based fourth. addition to and the expanded in U.S. the Lauder to QVC

Curtis also collaborations entrepreneurs, a Stone's Stone Curtis Cookware series, designers of Travel, with we the And size such and as content, to contributed new line. quarter. launched our Repeat, engaging new, this Cook, created leading Jason original sales fashion brand and types Wu We inclusive as exclusive timely growth such XX% for which

Looking will and growth, audit forward, that we merchandising resources new and after discovery in the emerging with our and structure be categories put we to products to believe business sourcing design, we're development development organization, and global decor high we leveraging differentiation the home relevant highly these new product the exclusive include consumer proprietary this and trending year. build brands categories. cookware as top home our and out in In and services go increased

and spas disinfecting, coverings. blockers, and search, performance on comfort quarter apparel and go International, products. and growing and at-home For and athleisure assortments and face games. bread trends and air beauty pools including every and delivered wine wash footwear; and vacuum in the those most and sealers, with cream makers to in increased new our digit food connected, the macro enthusiast in XX%. the from including virus and electronics products, strong and broad OIBDA exceptional makers fitness we’re from beauty kitchen nears along masking wellness hygiene team growth cook International categories with cleaning and the salon with and tapping beauty. among out focus and makers, the multiple in stay and ice the purification to on business pasta revenue nearly wine to double To fashion wear into products wear, and the OIBDA strength specialty sellers healthy, side outdoor goods, to and segments, focused crafts, growth, expanding sporting U.S. customers Coming we're customers. across The To and multicultural market categories, plant-based particular in In and revenue of home EV QVC sanitizing in acquisition equipment

inbound same shortages we not as were product nearly supply the markets Coast significant, West as most However, ports. face saw that constraints can the

in only have electronics our International markets the represents making I smaller Additionally, fourth purchase X% were meet and that note to their International much would quarter. orders also more the therefore mix of needs. flexibility

our new coupled We building to are and in needs, continue on teams video of daily mentality expanding of into focus with now capabilities app to particular expand to and user see having including and strong country tuned digital learn in the global regional test discovery, a dropship the assortments enhancing live market content, around with local commerce priorities, which benefit digital beta phase, generated developing highly streaming our built each is strategic a marketing. digital team’s deploying only

XXXX to is London it’s taking International strategy lead new momentum building great to applications, and also the are Our as on through globally longtail with is deploying strengthening learning fresh maximize is over many Company, Taylor, rollout and Zulily largely also making they Fog, affiliate capabilities influencer-based HUGO and airtime, new China pricing a outbound gains, Premier capabilities marketing. Mango, team diversifying The in among with its team optimize along on we direct marketing good expect productivity, and machine Brands, Vans Ann Boots, developed. introducing Hunter other launched gaining vendors buying program, network XXXX, Honest program. BOSS, its new Macy's,

differentiated progress, of with quarter a living and like customer us hard growing well outstanding marketing or another the strong few strong our an about significantly fluid We along back We're activity this from surge new had to navigate to marketing assortments. the Zulily focus the XXXX. building growth this and growth record Cornerstone and and we continue spend XXXX. continued home benefiting a margin environment. saw pulled strong that provided work efficiency. foundation successfully proprietary home with excited a expansion office, I'd chose ramp in into improved on with as Given up on in decor, outstanding outdoor in are for business. highly close to our adjusted and spending prospects all had quarter with coupled storage, team this thoughts Cornerstone positions long-term promotional we OIBDA revenue the home confident XX%

Given before availability, pace the reopen offices vaccine of earliest. the will we our not at September

it remains us, trends macro priority year priorities. been possibly aligned uncertain has excited from we're on safety The remotely. is demonstrates team on-site, with more relevant focus am ahead working the those those our increasing strategic capabilities and today. shopping live TikTok for despite our highest that seeing Our the the working our live Amazon never The to of background. members, both stream business our I of than

seeking engage turn messages long-term established investment and over to and how success fundamentals not lasting the story Jeff. I'll we positioned the favorite great the am and way. with choice your customer with learning the discovery, will have influencers, virtual getting live global of shopping On partner scale personalized at from joy is to connection with latest them the how favorite of the the the conversations, to for growth. engaging still technologies. into new pandemic and of influencers. human inspired. It's flashiest the we new And changed. in stream power infrastructure However, and today's to key on having of have we the I strength The financial world, customers technology the that, experience, shop, sustainable shop. emerge in stronger, It's confident relationships building leveraging for we well by pioneers both about wandering continued be to the behind have your support reach innovation, in expertise of we customers the our The not call reach an customer. and shopping And interesting platforms new in both products alike

Thank to Mike, everyone. good morning and you,

at we year. revenue in Qurate strong and full QX both and the OIBDA Retail growth Mike As delivered mentioned,

get So continued penetration basis of customer home started and Revenue E-commerce category, customer and quarter. QxH. through reduce revenue returns. and grew let's expansion momentum with improved X% in the points our base XXX grew

existing quarter, X% total the up For XX%. new X%. growing XX grew and up activated customers We with

customer believe HSN comparable to the HSN. both is the access years, going have in five QVC new history customer back class largest U.S. only we and While this data we of

and in home increased and categories, were the decor product overall we line demands products. in lower margin satisfy our customer Revenue sizable kitchen, sourcing promotional apparel XXX strong margins. XX% in as of furnishings did wellbeing home grew and fitness continue with and cosmetics jewelry days was in and wellness able basis XX% Yet, and market pullback. between and maintain – expansion OIBDA a our computers that XXX demand expanded primarily demand improved supply price delivered on Slide and and pandemic. mix several fashion split product Adjusted points, But XX% pockets strategic food and electrics, electronics of With Beauty and general home has chain and hollowware. and leather between higher away for Approximately adjusted reflecting active lounge home the office Gross strength equally shift accessories home from And in respect illustrated apparel. grew handbags. strength remained XXX household, and to mentioned. have XX% consumers cleaning environment we X OIBDA electronics XX% wear margin declined of earnings their to X% see margin. focus on point and non conditions. we of which with on was primarily and initiatives presentation, expansion into and challenged this led by subcategories products, declined wear points. category to basis such as family As for from Consumer increased the pressures Mike

returns and reduced to increases. pricing offset partially XX% Another XX% from from and rate customer surcharges freight

Recall commitments. I our of work additional work, overall in this XXXX to sourcing we strategic background. provide Given part initiated synergy the wanted of as impact some

funds such across benefits the arrangements our brands marketing grow and work program to middle both we of supply across We'll categories this started in bringing around groups and the as to the anniversary productivity just costs, and offering begin able chain through XXXX. with were Our XXXX. on to end-to-end work expand new towards assortments together, sales the create vendors all vendors to it reduce merchandise brands. two QVC HSN categories We and margin greatest broad the of optimize to work

call which basis basis ongoing were surcharges from from to with Finally, fulfillment fulfillment to due with offset customer times comprised average partially cost freight initiatives conditions. primarily increased points expense increases, and improved by Marketing reflects due customers. investment points, our primarily engage administrative centers points SG&A our retain across COVID partially upsell factor. productivity acquire, pack which executing addressing XX and in status from questions continued unfavorable, XX offset rate associated primarily basis of favorable and higher basis points Operating equally shipping challenges adhering our was split to longer and XXX protocols, service was XXX to costs. marketing unfavorable

rising marketing total XXXX. Our only spend in was net QxH while X% revenue for still

million year installment as cumulative end. We increase basis by spend our accruals. XXXX. the The of track offset favorable expect basis in annually, customer which this partially And promotional primarily at higher further points marketing HSN on grow to synergy to attractive of default the XX% compensation offered attractive we XX million bad costs administrative activities. pullback opportunities are debt with if returns. incentive marketing In and to to over the we due to fewer QxH reflects primarily expense are points was on Administrative deliver complete and XXX see we XXX average through closing, pressures, lower and payments – associated XXX rates remain

beauty will led currency grew with nearly new growth all QVC points. XX% International, strong the e-commerce new and My penetration margin XX% generated the generate games category every in Moving and any customers, and focus Japan, a and on three with across UK. constant basis up revenue in points. member e-commerce record customers and home and basis more in XX existing customer reactivated XX%, across grew for XX% XX% year broad-based The increased Revenue adjusted by OIBDA led X.X continues increased markets penetration. and increased results. strong and XX-year all attracted million Germany, very to by detail. QVC last up eight. OIBDA Total with gains quarter grew which E-commerce XX. XXX up adjusted comments expanding International to categories business new strong One

XXX which So reduced margins, returns, from initiatives. to strategic margin a customer improves points basis primarily higher product due gross basis, reflect sourcing it

gains due due partially obsolescence, also once benefited inventory carriage points, by investment management. favorable by proactive by expenses penetration, average sales and to lower leverage. from Operating contracts contracts. approximately offset commissions, fixed compensation inventory rate engaged outlet primarily and reflecting expenses and store We favorable basis were sales and a sales leverage higher retain, renegotiated were lower was due XX unfavorable higher fulfillment These driven primarily to partially primarily and offset price. on closures selling and marketing expenses e-commerce again SG&A by administrative incentive to leverage to acquire, higher customers

grew by Revenue in driven points OIBDA of fulfillment were as accruals improved XX% leverage to offset declined our basis XX%. mix, pressures grew customers customers well from freight centers, product by seasonal Moving margin primarily partially due as marketing declined growth. XXX adjusted wages international and incentive XX% administrative compensation new outstanding margins at grew hardlines well and $X costs to Adjusted OIBDA These million expenses. Total gains as and strong and home product higher customer Zulily. and expenses. as

as sustained of again surcharges. promotions, Garnet the in Adjusted rates Revenue freight once games textiles These administrative cashmere as its returned and or expenses. to primarily products. and and on by outstanding and momentum Cornerstone, and on brands Hill XX% gains brand margin increased to adjusted product outdoor Moving marketing and partially were grew the the strength OIBDA results decor, home core of $XX strength well OIBDA. offset driven home categories. and leverage delivering due home home million reduce of to growth record revenue higher

XXXX the our million reduction in full is QX a the review cash CapEx was sheet $XXX balance quickly indications. for year, initial $XX from let's and million and So which flow.

million. an for we anticipate a TV of $XXX million to range distribution to from CapEx $XXX renewals. year $XX million in contract reflecting XXXX, were off multi-year payments XXXX, For two-year cycle

we do $XXX average forward provide fiscal average, On TV XXXX. our not XXXX million While be annually. of distribution higher amortization payments will guidance, than

of customer outsize nearly increased As pretax was inventories, proceeds pullback $X reduced installment billion a of incentive payments, said, cash free $XXX capital Mike energy vendor from driven flow the we and improve growth a and you management flow payment This operations, investment returns. for by we primarily cash recall, generated million, received XXXX. green XXXX. benefited in accruals also Separately, extension terms, from bonus from the sale of in working

increased offered and this working back sourcing, We expect we pulling accounts serve year. XXXX conversion Recall, the from first receivable to to as capital are of to and capital in which source items installment of the accounts payable. in working a in now payments, which cash substantial normalized range of will a return more on reduce half These improvements XX%. XX% strategic of our free base not generated level flow

Finally, items the other in more XXXX. compares and half first first flow the And these in incentive cash the accruals for the paid difficult half of will be will free create of for year. bonus compensation

OIBDA with paths cash and end the we In our two closing, sustain of defined year, is net debt nothing million We credit times. of we our facility And had our and revenue $X.X revolver $XXX to ratio growth. at profile. and had Looking of by multiple billion drawn our QVC have cash equivalent. leverage At capacity. revolving the under

retention, rebalancing digitally continued competitive As realization margins – commissions shift will mix, forward trends and These development. we customers across as and reduce customer by fashion. contract And partially from drivers the management with behaviors driven our acquisition, industry XXXX, incentives audience the increases to will vendor demand, by and negotiations. now increased home call partially – with elevated look be are positive will to expanded I'll rates believe support customer best labor offset macro occasional prevailing of marketing continue the experienced to e-commerce new same in back category growth supporting strategic increase OIBDA to offset and and has consumer we reinforced our upside initiatives and turn Greg. and over penetration freight

Well, Mike the superior strong We had XXXX, Jeff. Thanks, in billion in year and special cash out returns as to well. performance two capital operating in Qurate dividends. paid nearly addition $X.X in a

cash your hope operator, above is We million tax The $X.X trading a and appreciate of will you. pretty, and all our to nicely. in billion we the And at MSI Qurate resumed very tools, par had an in the X% which stock our using you the also November. we all And meaningfully bonds and open continued that, also to I'd as buyback buyback potentially In move of a that now ran we dividends through of Qurate we moves for safe like did that XXXX, that to stock with late XX our floor And We high-class healthy. the reinstated Retail you shareholders. preferred free that interest your and generate liability material when flow a volume, repurchase with problem impact repurchased stock movement an our management. our call questions. sometimes stock anticipate great them to finally, also quickly. higher nearly deploy substantial Thank of our to portion

Well, thank KeyBanc you. [Operator Markets. Instructions] And Capital Yruma with question first will from Ed our come

as you a favorability you the habituated I continue but those XXXX know easy able And and looking become back Hey, reduce would assume perspective, you the guide be, guess rate and them to out taking in that of to XXXX, fall. that encourage a users? customers had can Thank are first years kind I how for gate? of behaving the of would back new you're obviously from maybe of returns to they're in How previous I normalization of we from pay. but a you. question. kind would buying amount going bring some to significant, I the at and into should of come they you're good different to able categories trends? lot know probably morning XXXX don't Thanks guess cohorts follow-up, guys. see be your we’re

Ed. you, take Jeff Mike. maybe on I'll first around is the and question part can the you of Thank payables. comment the This question

I to every We the they're to just kind giving performance of continue as quality customer single in very behavior in on classes. very the thing similar they're on is the to coming mentioned first new encouraged that in, be category. And that coming they're by prior quantity script, and both

So what buying. is is everyone aligned buying what they're with

in categories So down trending actually more the we've towards we're of by beauty. shift certainly seeing apparel a encouraged and a especially home, that but fact the growth strong name even of been new

in coming every category. on they're So

As how carefully. to quarter purchase customer threshold, time And getting that a these reengaging at you are is for stick one XX customers test of days. stood this is prior I threshold, we're over is threshold when they purchase metric watched new metric purchase mentioned of metric the talk amazing repeat or they're year that with it's with that the XX you get to within you part a are an really we about, if above mentioned smaller life going that That the absolutely seeing performance life. to days, probably sort that, which and a they And that we them us. about of I of within even XX hit metric as so has second

for all take of So what with don't it we they're sticking us, that's want – to on granted. those dimensions

example. mentioned say would of I to leaning big customers. programs. And new We're are how for I app, new a a looking retarget YouTube couple into of so the categories. at lot marketing we

that's kinds innovate video both proven then people So those new marketing to enjoy and much the now, continue little her or And a a physical we'll at of target on why we're as great purchase experience with her, very right she made she's others when of We'll as reminds lot we culinary are, seeing HSN a kind mail, first and of because very an where that personalized YouTube programs. catalog really that's disruptive finding mail, good brand successful. and just of present customer and outbound physical compelling a that QVC to email example.

catalog. this cool in back really And culinary through through so a we'll get experience those

pleased you with we're what part? And the seeing. to really want So second Jeff take

around your Sure. promotional was of Ed, the activities. part question

maybe it. as to of is some we the that of We promotions have a in have the really one really counts a our unique reset promotional were to one out with that's opportunity lifetime of doing overall once opportunity strategic being a just pandemic, just that to respect of kind actions that It's a you of note installment portion elements. important from element taken

driving demand As continue other to categories, as installment into move continue evaluate back customers order how those see to we'll possibly pulse overall. we we in payments we continue to rotate forward,

recall quarter really may that you in you of the will we promotional second started if XXXX. this pullback As

But want So one as quarter we kind of to go thing the we items. those of lot taking activities of through going fashion leave protect we'll to is with start shift beauty were a opportunity as that into I'd from these was margin second, given and home. some first that and the our as much we try and could anniversary into you to

then about is mix a buying currently or it's of usually beauty some lower just you start been little on go going the a it. we and forward. the margin back lower rate associated And returns, what think around aggressively moment may with to actions We'll is to we into piece opportunity our last have that you the to also one at how favorable for less overall But As this, a rate. of that will hopefully margin just our reflective which continue categories look that and have be more little take has an maintain to get they our decision see, in real have returns a may us, really and grow to while be return around disciplined fashion our activities categories. if trying promotional rotation very and

that So business the that I some higher return back portion offset about costs. into where return get and kind to may with fashion higher early of also of margins categories, beauty getting which We'll a rotation back associated have my think our rate.

Thank you.

you. Thank

next Wintermantel Our Evercore Oliver come question will with ISI. from

on good that QxH strong guys. Hi, question more morning, regarding with My decline. a and is

perspective said, in to to a was think addition and mix help then XX%. That shift shift the that. very home have I about CE for probably you must the for big margins down been

that about that if So you what due give qualitative us much or did maybe to mix maybe – quantitative help? information some could shift how margins,

to me you do take that? Mike, want

want you do Jeff, yes. that? take to Jeff,

Sure.

fourth as interesting given waterfalls, Customer of in overall electronics of penetration, kind in So one supporting a decline we item. mix was would customer result about the enough what have product margins. the last its and but items, as result probably us in been for actually the quarter making was our last mix of think favorable the

was have strategic major distance of where we but presentation, would for our margin returns us. to some category promotional that, increase, sourcing, in a it the product and So, mix pullback, of modestly favorable that drivers outlined pricing been far

of going I'd part was beauty. the see just don't it that say and a that you benefit because fashion reason by bigger I softness was add. offset to in

the mix margin a driver turns be expansion. category to So minor relatively out of

and the Got it. I just balance two Thank flow. it. you. And cash quick Got sheet on follow-ups

in of So, you mentioned CapEx, I about think X.X% at came sales.

Is talking was I season? with eight, capacity? below some selling you on centers? seven. into Thank for? it it's is are it like going two, Is guys down to were looks What what year. is then spending you said, then there? fulfillment you. more your level that there. Analyst inventories spring X.X% color six think this going up, next about Would you I the inventory up at the But what saw of like Like, what sales sales that, Day. go distribution or And it's last With were

dollar But and the fulfillment some part done the in guidance of were to to percentage network centers. of absolute more relates where inventories prior had. primarily resolved we're be our strategies. of supply up revenue. is spend, technology in you a XXXX, technology any a in our Oliver, But less order We net I that have the it's really by, followed anticipating expand standpoint XXXX. of our then it give while relates continue our it don’t work opine in We But as in to still to that platforms. invest of little you give So, than we the so much years necessarily for from we spend or as of sort coming challenges out to supply chain inventory, is continuing optimization. drive chain to it's capabilities around vast then majority the And that down of of can't

we're growth. disciplined how inventories continue We sales on our our be to focused really really growing support base and around supplier how we our and

of as as through go first our You year we replenish start see inventories chain get from you hopefully challenges. half the to away the would expect the of to some supply

Thank good it. and luck. Got you very much

you. Thank

next Eric Our Sheridan comes question from with UBS.

came ask question. for I'll in we had just so Thanks much international that than taking one, forecasted. stronger the

countries various You of do your that or guys. of tell interesting in have array might might recovery business XXXX? Appreciate Any and how through across are of Thanks what consumer that array as still the the the think we of sort behavior states international this midst about sense assets, of you the XXXX pandemic. it's you in go of operate color.

Especially is U.S. held behavior pressure they’ve same what most the the terms she Every broad-based as been in haven't Japan, with Hopefully, in the the little categories, we've Germany on market UK, see say, and well, of international. is you is would in category level selecting. are the beauty mirrors Yes, strongest more just U.S. delighted in categories strength and home up and the fashion better. the jewelry we in is strong. I it seen of consumer of performing thanks. and Yes,

in hard seeing Europe future But they little may a see the just have sure array a consumer got we're that more more change. closely means in exactly additional a draw on provided broad U.S., markets the some to benefits were the the constrained. business to indicators little future. conclusions Clearly it's I the competence, long-term. is making Business breadth that the more try recently the about sustain the to early what lockdowns International than a resilient We've of the a over businesses a to focused of for think So Europe But and categories. lot to close, a can in stronger engagement that brick-and-mortar little of so we're of staying hard main, we're as surely about environment trends strength pretty of to sort healthy across the say, that

Thanks so much.

Thank you.

Jason to will moving next question on And with Bazinet our Citi. be

questions. two Thanks,

us the on rate the there On than on then you a driver tax dichotomy out other international? a constant than system and is And basis, other was is, hurt I think, the international when question debentures. the currency electronic between to probably more my benefit gross domestic any guys, dropped you called that corporate there second exchangeable that

can sort just you If that works. of us how remind

of rate those the guide is it rates years? I true also good lower the shield? to tax federal the think lower a few had what pay back it This becomes that past you have value was you in tax a the the over if to go when slight up, mature Congress relative negative terms of

on Mike about the to happy talk I'm then details. I'll the on you the and take let U.S. impact

Thanks, Jason.

consumer a the of component International, are single delta. was As by growth the right electronics far you driver, differential U.S. biggest and so

is beauty Japan, jewelry that pressure seen similar they haven't difference this and in and fashion, the in other fact business. The Germany the

growing. as but growing So strongly those businesses aren't home, as

challenge extent and home pretty better some jewelry the and to up and So UK, holding Italy in fashion, Germany globally; consistent in and and beauty U.S. Japan.

the And good So the performance result all ask of seeing overall you two as And elements the of the a those bases, big take that customer I’ll you're of base. second. be differences. across Greg would customer to sort

at the deductions was were tax tax deduct at will imputed when So, those we was cash the we liability And way reduced, liability that will rate. – of And tax decreased. that have debentures, noted, feature have tax two the go the up. Jason, than you we to exchangeable tax pay and make liability rates, which interest rate corporate knowing building as revalue rate those the these to deferred the back income were with corporate likely we rate it have will deferred higher that. tax other I our points corporate taken about it series would the we just issued deferred increases,

the last generated have MSI DTL several that of that effect years, rates the projections And managing reducing is may at that will be the we corporate any deducted higher deducted go get in have ahead, been not liability. we be already. might you been bonds the some by have two, the it bonds than rate that in down of effect have we up net liability tax repurchasing over that which I some liability then seen still And likely to. First having and is will rate to to at noticed DTL

Makes perfect sense. Thank you.

And Carla our next question Casella comes JPMorgan. from with

that Is transaction you've leverage QVC how target and at range keeping or comfortable times. been the two your parent? low your dividends nice would you taking to for high right for be Hi, either within and noticed that about I further the

Jeff or Greg, do you want that? take to

I’ll be to Jeff you happy do to. want that

Greg. ahead Go

our corporate target level Q at Okay, stated times. X.X is leverage the

below obviously probably that times. around are two We the

helps repurchases time, so does XXXX dividends, create that leverage that a We opportunity. some generation in one problem, cash even And cash and had high-quality down. with our our enormous helps share drive

some flexibility do what years. flexibility. we'll quarters monitor in and do we And So have can with that coming the we

of about one XXXX? terms, I would follow-up payables, some the payable increased versus ask if it can have first all so to questions with all on half call extended you temporary you in temporary, permanent answered just the and and reverse Okay, of going some the

working that So that is we and of those And put component, one how once happened was negotiations our how all XXXX. of into course with over permanent. strategically extensions again, the all of were payables we vendors, place the

So to starting a really the that through see the of you'll year. second end of the start quarter reverse in

program. both accounts benefited it, our to instalment reduction which meant be payments, a on that has put finer To is the and long-term point receivable, in

that it's And capital get that of base. So, keep you the a normal base. don't of sort you of working newly have to the that them to they then just of end established copying not trends it's off sort reverse,

you. Thank

you. thank Perfect,

for question. are next ready the we Operator

Thank you.

Sean Our final Davidson. Henderson will question come with from D.A.

Hi, taking guys. very much for Thank question. my you

you historically to a also, a wanted Just you. customer Just And outs? costs Thank demographic then any cohort a know new little they customer the could of guys you are terms are normal? in on just at of kind more lower that new color guys bit provide seeing? and if acquisition acquired call being

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isn't focus look, to years, existing that. changing. you So, to be younger identical to tend on want and customers just stroke I six of demographics of literally kind would that average new on average prior expect, seven years, our Broad to the customers on new customers than

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I question. And, our was that think, last

all safe is And final all support. go everyone. time your continued So, pandemic. stage what hope stay you we for of of Thanks, of through as thanks you well to and and hope interest and the we this

Have Thank your participation. do thank an you. conference. conclude day. for We excellent today's That does you