WEST CHESTER, Pa., Oct. 17, 2018 /PRNewswire/ -- Qurate Retail Group
(QRG) today announced a series of initiatives designed to better
position its HSN and QVC US businesses for long term growth,
increase synergies, and accelerate the Company's digital
transformation, building on the integration strategy announced
following the HSNi acquisition in December
2017.
The initiatives announced today are:
- Combining the HSN and QVC US business units into a new business
unit that will be referred to as QXH.
-
- This will ensure an aligned approach to the US market and
better leverage the combined scale and resources of the two
organizations, while still maintaining the unique identity of each
brand and the St. Petersburg, FL
campus for HSN.
- Streamlining operations, principally at HSN, to create a
leaner, more agile organization and better leverage the resources
of QRG.
-
- Approximately 350 positions will be eliminated by year-end
2018, the majority at HSN's St.
Petersburg, FL and Long
Island, NY operations, and a smaller number of QRG and QVC
positions in West Chester,
PA.
- Integrating the HSN and QVC US fulfillment networks to enhance
delivery speed and lower costs to serve customers.
-
- The first phase includes opening a new fulfillment center in
Bethlehem, PA in 2019 as well as
anticipated closures of fulfillment centers in Lancaster, PA, Roanoke, VA, and Greeneville, TN in 2020. Approximately 1,725
positions will be eliminated in these centers upon closure,
partially offset by the anticipated hiring of 1,200 – 1,500
positions at the new Bethlehem
facility.
- Additionally, QRG will evolve toward a leased vs. owned model
for many of its fulfillment facilities, to increase flexibility and
reduce longer term capital requirements.
"As the world's leader in social, digital and video commerce,
Qurate Retail Group is committed to extending our leadership in a
rapidly changing retail market and attracting the next generation
of consumers by bringing compelling product discoveries to market
every day, creating seamless customer experiences, and developing
highly engaging digital and social shopping platforms," said
Mike George, President and Chief
Executive Officer, Qurate Retail, Inc., the parent company of QVC
and HSN. "The changes announced today will enable us to accelerate
this transformation by better leveraging the considerable scale and
resources of our HSN and QVC US businesses."
Taken together, HSN and QVC US generated $8.5 billion in revenue in 2017, reached 100
million homes through five broadcast networks, attracted more than
1 billion visits to its websites, and shipped over 170 million
items. The initiatives announced today are expected to drive growth
by enabling HSN and QVC US to better serve their combined US
customer and vendor base.
Expected benefits include:
- Enhanced product discovery and optimization of product
offerings across broadcast networks and digital and social
platforms, supported by expanded live and on-demand content;
- Improved delivery times and package consolidation;
- Heightened focus, speed, and agility in response to customer
needs and market changes; and
- Greater cost synergies from the HSNi acquisition, as outlined
below, used in part to fund performance marketing and other
investments geared toward accelerating growth and driving the
digital initiatives.
Team members impacted by these reductions and closures will
receive support to aid in their transition, including severance
payments, continuation of some benefits, and outplacement
assistance.
At its May Investor Day, QRG outlined $200-$220 million
of estimated run-rate operating synergies from the HSNi
acquisition. The aforementioned initiatives are expected to deliver
an additional $120-$125 million of synergies, bringing total
estimated run-rate operating synergies to $320-$345 million
by 2022.
The details of the expected additional synergy benefits and
costs, resulting from both the initiatives announced today and
others that are being evaluated by QRG, are as follows:
- $120-$125
million annual incremental run-rate synergies in 2022
-
- $40 million expected in 2019
- Ramping to $120-$125 million annual synergy benefit in 2022
- $20 million annual incremental
lease expense in 2022
-
- $10 million in 2019
- Ramping to $20 million in
2022
- Reflects shift from owned to leased fulfillment centers
- Incremental one-time costs:
-
- $40-$45
million severance and restructuring expense in Q3-18 (below
adjusted OIBDA)
- $30 million startup and dual
running costs of new facilities over the course of 2019-2021
(included in adjusted OIBDA)
- $200 million one-time net capital
investment through 2022 for new fulfillment centers, automation,
and technology investments, net of anticipated proceeds from sale
of existing facilities
"Today's initiatives are the next step in our ongoing review of
how to best continue the integration of HSN and QVC. With a focus
on driving digital transformation, these efforts will extend our
leadership in social, digital, and video commerce," added George.
"I want to thank the many dedicated team members who will be
impacted by these changes. Their commitment to HSN, QVC, and our
customers, in some cases spanning 25 years or more, has been
instrumental to our success. Our excitement today over the positive
impact of these changes is tempered by the loss of many valued team
members."
Combining the HSN and QVC US business units into a new QXH
business unit, while maintaining the unique identity of each brand
and the St. Petersburg, FL
headquarters for HSN
The HSN and QVC US business units are being combined to form a
new business unit that will be referred to as QXH. "The QXH name
reflects the continued importance of the QVC and HSN brands, the
multiplying power of bringing these brands together to maximize
performance in the US market, and the engaging customer experiences
we will offer across our five HSN, QVC, and Beauty iQ networks and
digital properties," according to George. The QXH leadership team,
reporting to Mike George, will
include:
- Mary Campbell, Chief
Merchandising Officer, QRG and Chief Commerce Officer, QVC US, who
will be responsible for QXH Merchandising, Marketing, Brand, and
Digital strategy and the QVC US Digital, Content, and Broadcast
operations. Mary will have primary responsibility for the
development and growth of the QVC brand.
- Mike Fitzharris, President, HSN,
who will be responsible for QXH Video Platform Expansion and
Distribution and the HSN Digital, Content, and Broadcast
operations. Mike will have primary responsibility for the
development and growth of the HSN brand and oversight of the
St. Petersburg campus.
These appointments are effective immediately. As part of these
changes, the QVC US President role is being eliminated, and
Steve Hofmann, who currently holds
that position, will be leaving QRG effective Oct. 19, 2018.
"I want to thank Steve for his many contributions to QVC and QRG
over the last 11 years. He's led both our QVC International
and US businesses and played key roles as we've grown our global
organization," said George. "Under Steve's leadership, QVC has
expanded its global presence, deepened customer relationships
around the world, and developed more streamlined operations across
QVC's international markets. Everyone at Qurate Retail Group wishes
him well in his future endeavors."
Additionally, the HSN and QVC US buying organizations are being
combined and structured around seven strategic category groups:
Apparel, Accessories and Jewelry, Beauty, Kitchen Electronics and
Cookware, Home Innovations, Home Style, and Consumer Electronics.
Category leaders will be responsible for developing and driving
strategies to maximize growth in the US market, across both the QVC
and HSN platforms.
This integrated buying organization is expected to provide
several benefits, including: increased speed to market with the
best brands, products, ideas and entrepreneurs; optimized product
assortments across QXH's five US networks and multiple web and
social platforms to maximize customer choice; a more aggressive
pursuit of white space opportunities; and better alignment with our
vendor partners.
Mary Campbell said, "This
approach will streamline business practices and create more
opportunities for brands across QVC and HSN. It will enable us to
drive product leadership and brand-building capabilities across a
united team, while preserving the unique positioning of QVC and
HSN."
Streamlining operations, principally at HSN, to create a
leaner, more agile organization and better leverage the resources
of QRG
HSN is implementing a number of changes designed to better focus
the organization on the most important growth opportunities and
create a leaner, more agile business capable of responding more
quickly to its customers. These changes better align the
organization with the previously announced strategies aimed at
restoring HSN to growth by creating fresher and more diverse
product assortments, enhancing the on-air experience, driving
digital growth, and improving the customer experience. HSN will
also undertake a redesign of its campus to create a better
working environment and ensure that the facilities enable the team
to operate at its best.
The new organization design is expected to enable HSN to better
leverage Qurate Retail Group's resources. The design was based, in
part, on learnings from how QVC operates its international
businesses to best serve the local markets while also leveraging
global resources and scale.
Additionally, HSN is closing its Ingenious Designs facility in
Long Island, NY, shifting the
design and sourcing of those product lines to QRG's in-house design
and sourcing team.
"We are beginning to see progress with our initiatives designed
to turn around the business, and we are fully committed to the HSN
brand and to our St. Petersburg
home. The actions we are taking today are difficult, but they are
imperative for our long-term success," said Mike Fitzharris, President, HSN. "We thank all
of our HSN team members for their hard work and dedication over the
years, and for the support of the Tampa
Bay community as we continue to evolve our business for the
new retail economy."
Qurate Retail Group is also reducing some resources in its
corporate support operations due to the deeper integration and
streamlining at HSN. Additionally, QVC US is eliminating positions
in a few areas in order to redeploy resources into its digital
offerings and performance marketing teams while also expanding the
number of live and on-demand hours of content produced.
Integrating the HSN and QVC US fulfillment networks to
enhance delivery speed and lower cost to serve customers
Qurate Retail Group is launching a multi-year strategy to
restructure and integrate the HSN and QVC US fulfillment
networks.
Today, QRG operates four HSN and five QVC US fulfillment
centers, with many of the fulfillment centers dedicated to specific
categories, such as hard goods or apparel. Over the next three to
four years, QRG plans to:
- Combine HSN and QVC fulfillment centers into integrated
fulfillment centers carrying the full product assortments of both
brands, in order to combine shipments to the customer and lower
operating expenses.
- Relocate some fulfillment centers to reduce delivery time to
the customer and lower freight expenses.
- Upgrade fulfillment technologies, including deploying a
proprietary Warehouse Management System (WMS) that is expected to
allow QRG to improve speed and efficiency of serving customers
across all brands. The new WMS is currently being implemented in
QVC's Florence, SC fulfillment
center and will be followed by the Rocky
Mount, NC facility.
Once completed, the integrated fulfillment network is expected
to: increase average delivery speeds to customers by two days;
enable more items to be consolidated into single shipments to
improve customer convenience; and deliver significant savings in
freight and fixed costs.
In the first phase of this program, QRG will invest in a new
state-of-the-art fulfillment center in Bethlehem, PA, which is planned to open
mid-to-late 2019 and will have a workforce of 1,200-1,500 at full
operation. The new facility will handle both QVC and HSN product,
and fulfill approximately 25 percent of network volume. The new
facility is also expected to feature QRG's proprietary WMS
platform. The facility is in addition to the existing zulily
fulfillment center also located in Bethlehem, PA and will not affect operations
at that site.
With the new facility in Bethlehem, QRG will ultimately close its QVC
fulfillment center in Lancaster,
PA and, as previously announced, its HSN fulfillment center
in Roanoke, VA, and its temporary
fulfillment center operation in Greeneville, TN. All will continue to
operate as they do today until the Bethlehem facility is fully operational in
2020. Approximately 1,725 team members in those sites will be
affected by this transition.
"This difficult decision was made after much discussion and
thoughtful analysis and is expected to provide us with the
capability to fulfill packages across brands and consolidate
shipments for a better, faster and more environmentally friendly
customer experience with lower shipping costs," said Bob Spieth, Chief Operations Officer, QRG. "Our
operations in Lancaster,
Roanoke and Greeneville have served us well over the
years, and will continue to do so over the near-term. We thank our
teams there for their dedication and support as we move
forward."
Forward-Looking Statements
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including, without limitation, statements about
initiatives regarding Qurate Retail Group and the HSN and QVC US
businesses (the "initiatives"), the timing of the implementation of
the initiatives, expected changes in employee headcount as a result
of the initiatives, and expected benefits resulting from the
initiatives, including the amount and timing of expected
synergy benefits and costs resulting from the initiatives. These
forward-looking statements involve many risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied by such statements, including, without
limitation, general market conditions. These forward-looking
statements speak only as of the date of this press release, and
each of Qurate Retail, Inc. ("QRI") and QVC, Inc. ("QVC") expressly
disclaim any obligations or undertakings to disseminate any updates
or revisions to any forward-looking statement contained herein to
reflect any change in QRI's or QVC's expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statement is based. Please refer to the publicly
filed documents of QRI and QVC, including each of their most recent
Forms 10-K and 10-Q for additional information about QRI and QVC,
respectively, and about the risks and uncertainties related to each
of QRI's and QVC's business which may affect the statements made in
this press release.
About Qurate Retail Group
Qurate Retail Group comprises seven leading retail brands — QVC,
HSN, zulily, Ballard Designs, Frontgate, Garnet Hill and Grandin Road — all dedicated to
providing a 'third way to shop,' beyond transactional ecommerce or
traditional brick-and-mortar stores. Globally, Qurate Retail Group
is #1 in video commerce, reaching approximately 370 million homes
worldwide via 16 television networks and multiple ecommerce sites,
social pages, mobile apps, print catalogs and in-store
destinations. Qurate Retail Group is #3 in ecommerce in
North America and #3 in mobile
commerce in the US (according to Internet Retailer). Qurate Retail
Group combines the best of retail, media and social to curate
products, experiences, conversations and communities for millions
of highly discerning shoppers – bringing joy, inspiration
and humanity to shopping. Qurate Retail Group also curates large
audiences, across multiple platforms, for thousands of brand
vendors. Headquartered in West Chester,
PA, Qurate Retail Group has 27,000 team members in the US,
the UK, Germany, Japan, Italy,
France, Poland and China. For more information, visit
www.qurateretailgroup.com.
Qurate Retail, Inc. (NASDAQ: QRTEA, QRTEB) includes the Qurate
Retail Group portfolio of brands as well as other minority
investments.
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SOURCE Qurate Retail Group