Dive Brief:

  • Qurate Retail Group’s corporate rating was downgraded to B+ at S&P Global Ratings after a rocky start to 2022 for the owner of QVC and Zulily.
  • In a release shared with Retail Dive, S&P analysts cited “ongoing supply chain constraints and lower discretionary spending [that] will weigh on the company’s efforts to turn around operations” as reasons for the downgrade.
  • Also this week, Qurate announced new executive appointments. The company tapped Soumya Sriraman, most recently the head of Prime Video Channels at Amazon, as president of Qurate’s streaming unit. Stacy Bowe, who’s held merchandising leadership roles at Macy’s and G-III Apparel Group, has taken over as chief merchandising officer for QVC U.S. 

Dive Insight:

Qurate CEO David Rawlinson II had a long list of reasons for the company’s 16% drop in revenue in the second quarter: inflation, war in Ukraine, rising interest rates, a fire last December at a fulfillment center, and ongoing supply chain challenges.

Declines were seen across nearly every section of Qurate’s business. Revenue at the company’s troubled Zulily e-commerce business was down a whopping 45%, leading to a $51 million operating loss. The company cited supply chain constraints and a decrease in marketing spending for the declines.

The one area of growth was Qurate’s Cornerstone business, which includes the home goods sellers Frontgate, Ballard Designs and Grandin Road as well as Garnet Hill, also a catalog specialist.

Executives say they are working to stabilize the business, including through new hires and a cut in headcount at Zulily, which has a new CEO in Terry Boyle, who previously launched Nordstrom Rack’s e-commerce business for the department store chain. 

S&P analysts noted that Qurate’s customer count “continued to decline year over year, with the number of total customers dropping below its June 2019 level as the company remained exposed to discretionary spending despite its loyal customer base.” They also said that Qurate had “limited ability to effectively adjust its merchandising strategy amid the early stages of its turnaround.”

Inventory problems could mean further profit compression even as the company takes steps to stabilize, the analysts also said. Still, S&P gave the company a stable outlook on the expectation that Qurate can maintain its debt levels even while weathering macro and operational challenges. 

Longer term, Qurate has to manage changes in television viewership, as more consumers switch from cable to streaming, cutting into a key part of the company’s business that remains dependent on television as a retail channel. The S&P analysts noted, though, that Qurate “has adequate financial resources to expand its digital and mobile content” as more consumers cut the cable chord. 

On that front, Qurate has a seasoned new executive in Sriraman, who led Amazon’s Channels business that created add-on, a la carte channels such as Discovery+ and Paramount+ for Prime members. She was also the founding CEO of BritBox, a subscription video on demand service in the U.K. 

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