QVC GROUP, INC. 2024 ANNUAL REPORT ON FORM 10-K

QVC Group Navigates Challenging Retail Environment in 2024

The QVC Group, a leading global video commerce company, faced a difficult year in 2024 as it grappled with declining revenue and significant impairment charges. Despite these headwinds, the company remains focused on adapting its business model to changing consumer preferences and investing in its digital platforms.

Revenue Declines Across Segments

The QVC Group’s consolidated revenue decreased 8.0% in 2024 compared to the prior year, falling from $10.915 billion to $10.037 billion. This decline was driven by decreases across the company’s three main reporting segments:

• QxH (QVC and HSN in the U.S.): Revenue fell 5.7% to $6.598 billion, primarily due to a 5.3% drop in units shipped and a 0.7% decline in average selling price.

• QVC International: Revenue declined 2.2% to $2.399 billion, with a 2.9% decrease in average selling price partially offset by a 2.6% increase in units shipped.

• Cornerstone Brands, Inc. (CBI): Revenue fell 10.7% to $1.040 billion, as units shipped dropped 6.9% and average selling price decreased 4.6%.

The company attributed these revenue declines to a combination of lower consumer demand, increased promotional activity, and unfavorable foreign exchange rates in the case of QVC International.

Significant Impairment Charges

The most significant factor impacting the QVC Group’s financial performance in 2024 was a massive $1.480 billion impairment charge related to the goodwill and tradenames of the QxH reporting unit. This charge, along with a $326 million impairment in the prior year, reflects the challenges the company has faced in its core QVC and HSN businesses.

The impairments were driven by the company’s annual assessment of the recoverability of its goodwill and other non-amortizable intangible assets. Due to the significant impairments, the fair values of these assets no longer significantly exceed their carrying values, leaving them more vulnerable to future write-downs should business performance decline further.

CEO John Malone commented, “The impairment charges we’ve taken over the past two years underscore the need for QVC to evolve its business model to better meet the changing preferences of today’s consumers. We remain committed to investing in our digital platforms and diversifying our product offerings to drive long-term growth.”

Profitability Impacted by Impairments

The QVC Group’s consolidated operating income swung to a loss of $809 million in 2024, compared to a profit of $590 million in the prior year. This dramatic decline was primarily attributable to the $1.480 billion in impairment charges recorded during the year.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization), a non-GAAP metric that excludes the impact of impairments and other one-time items, increased slightly from $1.074 billion in 2023 to $1.103 billion in 2024. This 2.7% improvement was driven by:

• A $19 million increase in Adjusted OIBDA at QxH
• An $8 million increase at QVC International
• A $33 million reduction in Adjusted OIBDA losses at the corporate level

These gains were partially offset by a $31 million decrease in Adjusted OIBDA at CBI.

The company’s net loss for the year was $1.250 billion, compared to a net loss of $94 million in 2023. This swing to a larger net loss was primarily due to the impairment charges.

Liquidity Remains Strong

Despite the challenging operating environment, the QVC Group maintained a strong liquidity position, with $905 million in cash and cash equivalents as of December 31, 2024. This included $297 million at QVC, $135 million at CBI, and $473 million at the corporate level.

The company also had $1.586 billion available for borrowing under its credit facility. QVC Group and its subsidiaries remained in compliance with their debt covenants as of the end of 2024.

Looking ahead, the company expects to use its cash for a variety of purposes, including:

• Approximately $330 million in estimated interest payments on corporate and subsidiary debt
• $230-$245 million in anticipated capital expenditures
• Repayment of certain debt obligations
• Payments related to television distribution rights
• Dividends to holders of the company’s Preferred Stock
• Additional investments in existing or new businesses

CEO Malone expressed confidence that the company’s cash on hand and cash flow from operations will be sufficient to fund these projected uses of cash.

Adapting to Changing Consumer Preferences

A key focus for the QVC Group in 2024 and beyond will be adapting its business model to better meet the evolving preferences of consumers. The company recognizes the need to further strengthen its digital capabilities and diversify its product offerings to remain competitive.

“The retail landscape is changing rapidly, and consumers are increasingly gravitating towards online and mobile shopping experiences,” said Malone. “We’ve made progress in enhancing our digital platforms, but there is still more work to be done to seamlessly integrate our television programming with our e-commerce and mobile channels.”

In addition to investing in its digital infrastructure, the QVC Group is also seeking to broaden its product assortment beyond its traditional focus on home goods and apparel. The company believes diversifying into new categories can help attract a wider customer base and reduce its reliance on any single product segment.

“While our core home and apparel offerings will remain an important part of our business, we see opportunities to expand into adjacent categories that align with our customers’ evolving interests,” Malone explained. “This diversification strategy is crucial to driving long-term growth and positioning the QVC Group for success in the years ahead.”

Outlook Remains Cautious

Given the headwinds faced in 2024, the QVC Group is approaching the future with cautious optimism. The company will continue to monitor macroeconomic conditions, consumer trends, and the performance of its reporting segments to identify areas for improvement and investment.

“2024 was a challenging year, but we remain committed to taking the necessary steps to strengthen our business and position the QVC Group for long-term success,” said Malone. “We are confident that our focus on digital innovation, product diversification, and operational efficiency will enable us to navigate the evolving retail landscape and deliver value for our shareholders.”

As the QVC Group looks to the future, investors will be closely watching the company’s ability to adapt its model, drive revenue growth, and maintain profitability in the face of ongoing industry disruption. The road ahead may not be easy, but the QVC Group is determined to evolve and thrive in the changing retail environment.