QVC Group Inc (QVCGA) 2014 Q2 法說會逐字稿

Good day, everyone, and welcome to the Liberty Interactive Corporation second-quarter conference call. Today's call is being recorded. At this time, for opening remarks and introductions I would like to turn the call over to Courtnee Ulrich, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements under the Private Securities Litigation Reform Act of 1995, including statements about business strategies, the proposed creation of (technical difficulty) tracking stock, the proposed spin-off of Liberty TripAdvisor Holdings, the pending Provide Commerce transaction, market potential, future financial performance, new service and product launches, and other matters that are not historical facts.

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, possible changes in market acceptance of new products or services, our ability to satisfy the conditions to both the proposed creation of the QVC group (technical difficulty) and the proposed spin-off, Liberty's ability to complete the pending Provide Commerce transaction, competitive issues, regulatory issues and continued access to capital and returns acceptable to Liberty Interactive. These forward-looking statements speak only as of the date of this call and Liberty Interactive expressly disclaimed any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Interactive's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations, preliminary notes and schedules 1 through 3 can be found at the end of this presentation. And now I'd like to introduce Greg Maffei, Liberty's President and CEO.

Good morning. Thank you for joining us. Today, speaking on the call besides myself we will have Liberty Interactive's Chief Financial Officer, Chris Shean; QVC's CEO, Mike George; and QVC US's CEO, Claire Watts. So looking a at Liberty Interactive's highlights, first at QVC, QVC experienced strong revenue and adjusted OIBDA results across all of the European markets, more solid revenue and adjusted OIBDA in the US, and the China joint venture, CNR Mall, posted excellent revenue growth driven by new and repeat customers and distribution increasing to 81 million homes.

I know that many of you may have questions about our structural plans at LINTA. First, let me emphasize, as we did in our press release earlier last week, that we intend and remain committed to forming a pure QVC Group tracking stock, which will consist of QVC and HSN only. The timing on this has been delayed from our initial announcement, obviously, but as I said, we are committed and intend to move forward.

Second, we're very happy with our recently announced Provide Commerce/FTD deal. The combination of the complementary businesses will create a floral and gifting company with annual revenues well over $1 billion, and they should be able to build excellent scale together. We're also pleased with the market's reaction to this announcement.

As we announced last week, and this is in line with the structural aspects of the QVC pure play tracking stock, we are re-evaluating the optimal structure of Liberty Digital's commerce assets. I don't know exactly when I'll be able to announce, or when we'll be able to announce the decision, but I expect it will be in the near term.

The eCommerce companies did have a much better quarter on the top line but continue to struggle on the bottom line. Management teams at those companies, and we've changed out a few, remain focused on operations and executing on their plans for 2014. On the capital markets side, LINTA repurchased $274 million of its stock from May 1st through July 31st.

Turning now to Liberty Ventures, we filed an amended S-1 for Liberty TripAdvisor's Holdings on July 25th. We hope to have this completed this month, but there are some regulatory hurdles we need to clear, and the timing of when our financials remain live and don't go stale may push us until next month. TripAdvisor, from an operating perspective, reported excellent second-quarter results, solid top line growth, driven by increased click-based revenue, and a re-acceleration in hotel shopper growth.

Mobile traffic continues to gain notable share at TripAdvisor. TripAdvisor also announced an agreement to acquire Viator, a leading resource to research and book destination activities that are very complementary with the traffic and people looking for travel worldwide. With that, let me turn it over to Chris Shean to discuss the Liberty Interactive financials.

Thanks, Greg. Liberty Interactive Group's revenue increased 4% in the second quarter, while adjusted OIBDA was down 1%. Liberty Interactive's eCommerce business' revenue increased 10% for the quarter and adjusted OIBDA decreased 27%. While Provide, Backcountry and Bodybuilding all increased revenue, the increase came in below anticipated levels due to softness in demand for their products and slightly lower average order values. The decrease in adjusted OIBDA was due to increased technology and personnel costs at these subsidiaries to support anticipated revenue growth, which ultimately did not materialize during the quarter, slightly lower product margins, increased packaging costs, increased returns, and increased marketing spend.

Now let's take a quick look at the liquidity picture. At the end of the quarter, Liberty Interactive Group had attributed cash and liquid investments of $703 million, and $5.2 billion in principal amount of attributed debt. QVC's total debt to adjusted OIBDA ratio, as it's defined in its credit agreement, was approximately 2.1 times as compared to a maximum allowable leverage of 3.5 times. Now, with that, I'll hand the call over to Mike George for additional QVC commentary.

Thank you, Chris. We were pleased with the sales momentum across most of our markets in Q2. We drove continued strong results in the UK, improved our revenue trend compared to Q1 in both the US and Italy, achieved our best performance in Germany in almost three years, and grew our China joint venture 27%. However, these gains were partially offset by poor performance in Japan, where we experienced a significant sales fall-off, driven by the VAT increase that went into effect April 1st.

We also achieved good results in our digital platforms. Mobile commerce remains strong, up 47% to now represent 40% of all global eCommerce orders, and overall eCommerce represented 43% of US revenue, up from 42% last year, and 39% of global revenue, up from 37% last year. We expanded our television presence as well, picking up 14 million additional homes for QVC plus, our second channel in the US, effective July 1st, and in the UK we launched our QVC extra channel on the DTT platform, extending its reach by an additional 8 million homes. We recently announced our leadership team for QVC France and have begun preparing for an anticipated Q2 2015 launch.

Now turning to the results by market, in the US, revenue increased 3%, with strong growth across most categories. Adjusted OIBDA grew 2%, with gains in product margins due to the mix shift away from consumer electronics and towards fashion, offset by some expense pressures, especially higher spend in online marketing and some investments in technology, eCommerce and global market expansion activities.

Our Japan business struggled throughout the quarter. I had warned on our May call that the VAT increase on April 1st drove a substantial pullback in discretionary consumer spending in the market, leading to a significant shortfall in our April results. In May, we thought the worst was likely behind us. Unfortunately, the depth and duration of the sales hit was much greater than we anticipated.

The market turned highly promotional in May and June as retailers fought to get customers back and we weren't able to compete effectively with these aggressive discounting activities. As a result, we faced double-digit sales declines in both April and May in local currency. The impact did moderate somewhat in June with sales declines in the high single digits. And in July, we experienced a mid-single-digit decline in sales. Our margins were also negatively impacted because we had to absorb the VAT increase for products we sold in March, but shipped in April, and we also remixed our business toward lower price point, lower margin items.

Despite these very challenging results, there are at least a few encouraging signs. In the back half of the quarter, we were able to stabilize product margin rates. Our return rates are down. Our expenses are tightly managed. And while sales are still running down to last year, we have seen a moderation in the declines over the last two months, as I noted.

Our German team delivered a strong quarter, with a 5% revenue increase and 11% adjusted OIBDA pick-up in local currency, our strongest results since 2011. The revenue growth was heavily influenced by a 457 basis point decline in return rates as we adjusted the product mix away from high returning fashion categories and implemented a number of quality improvement initiatives. We are especially encouraged by the strong growth in new customers, up 13% in the quarter. The strong adjusted OIBDA margin gain was driven by lower freight costs due to the drop in returns, lower inventory obsolescence rates as we cleaned up inventories, tight expense management, and an accrual reversal for a cable provider commissions related to prior years. These gains were partially offset by a decline in product margins, due largely to the product mix shift.

The UK continues its winning streak, with 6% revenue and 18% adjusted OIBDA growth in local currency. This was a strong and balanced performance with growth across nearly all product categories except consumer electronics, good growth in expansion on our QVC beauty, QVC style, and QVC extra channels, a reduction in promotional usage, increased product margins, improved product delivery times following the completion of our warehouse automation program, and tight expense management.

In Italy, our revenue grew 9% in local currency, a solid improvement over the low-single-digit growth of Q1. Existing customer retention and repeat purchase rates remained strong. In addition, the move to an Italy-based distribution center has significantly improved product delivery times and reduced freight costs and we've also driven reductions in order cancellation rates and return rates. We also reduced our fixed costs year over year, contributing to a 68% reduction in the prior year adjusted OIBDA loss, to just under 1 million Euros.

Going forward, we remain focused on getting Italy back to double-digit growth and higher new customer acquisition rates by re-accelerating sales in the home categories, which have underperformed over the last few quarters. We saw some improvement in our home business in Q2 and have a number of actions in place to further strengthen the business through the remainder of the year.

Our China joint venture, CNR Mall, continues to perform well with a 27% revenue increase in local currency and a slight reduction in the adjusted OIBDA loss to just 13 million RMB. We continue to enjoy high rates of new customer acquisition, introducing 214,000 new customers to the brand in Q2, bringing our rolling 12-month active customer count up to nearly 1.1 million. Importantly, we continue to see modest but sustained increases in our repeat purchase rate in China, a clear indication that our initiatives to broaden the product mix, increase product rotation, add strong global brands to the assortment and improve program content and quality are paying off. We were also delighted to announce that later this summer we will be co-branding the business, combining the QVC and CNR logos into one joined (technical difficulty) that reflects our aspirations to bring the best of China and the best of global QVC to our customers.

Now I'll turn it over to Claire to discuss the US results in more detail.

Thank you, Mike. QVC US saw strength in home and garden, kitchen and cooks, apparel and accessories categories while experiencing continued softness in the electronics category. Our product margins saw impressive growth in the quarter as we experienced strong margin increases in accessories and jewelry, as well as the decline of electronics in the mix. Our unit growth of 3% is the highest since Q3 2010 and marks our fourth consecutive quarter of unit growth.

Our home division was driven by positive results in cooking and dining, including our food business, cleaning and floor care and lastly, fitness. In The Kitchen With David with QVC's resident foodie David Venable, continues to draw a big audience on-air and on our digital platform, helping to generate great sales results from brands like Vitamix, Master Built and Cooks Essentials. New innovations from Dyson, Shark, and Lori Greiner contributed to strong results in cleaning and floor care and our fitness business saw great momentum with the very popular, FitBit.

Apparel and accessories also generated a solid quarter. The customer responded well to several fashion day events, with successful brands like LOGO by Lori Goldstein, our proprietary brands, Denim and Company and GILI as well as Dooney & Bourke, Vionic with Orthaheel, and Skechers.

For the second year, our customers responded to our Beauty with Benefits event in partnership with the Cosmetic Executive Women. QVC generated more than $1 million for Cancer and Careers as a part of our ongoing commitment to promote the success and wellness of women through the power of relationships. With high engagement across multiple QVC platforms, the Cancer and Careers website received more than three times their weekly average site visits.

We continue to explore ways to further engage customers with compelling content and a unique experience across all of our platforms. In June, we offered a Day of Vicenza Style, live from Italy which generated strong engagement with program host, Lisa Robertson, most notably through social and video content. We utilized our second channel, Q Plus, to offer three hours of live programming of the event, as well as, QVC.com for a webcast of the event. Both of these saw high viewership from our customers. Overall, we're continuing to see strength in the viewership on QVC plus, which provides us an additional broadcast channel to reach new customers and expand our audience and creatively counter-program our main channel. The July contract that we signed with Dish brings our QVC platform to approximately 47 million homes.

And with that, I'll turn it back to Chris.

Thanks, Claire. Let's take a quick look at the liquidity picture over at Liberty Ventures Group. At the end of the quarter, the Group had attributed cash and liquid investments of $1.9 billion, and $2.4 billion in principal amount of attributed debt, which includes $721 million of TripAdvisor cash and liquid investments, on the cash side, and $353 million of their debt facilities. The value of the public equity method securities and other public holdings attributed to the Group was $2.3 billion and $1.1 billion, respectively, at the end of the quarter. Now with that, we'll hand it back to Greg.

Thank you to Mike, Claire and Chris, and to the audience, we appreciate your continued interest in Liberty Interactive and with that I'd like to open it up for questions. Operator?

Thank you.

(Operator Instructions)

And we'll take our first question from Eric Sheridan with UBS.

Thank you for taking the question. When you look at the potential for the eCommerce tracker and the QVC spin, with nothing you announced today, I did want to understand what options you might be looking at or issues you're trying to work through as you examine all the different routes you can go there. Thank you.

Well, we're probably almost as good as speculating on what we could do as you are. But you can imagine tracking it another way. You can imagine a sale. You can imagine a sponsored spin.

We're pretty good at coming up with ideas, and I'm not really going to tip my hand on any of them today because we haven't made any decisions. So, the goal, first and foremost, is to get a pure QVC HSN; and then secondarily, define the right home for those Digital Commerce assets, and organize them in a way that we think that gives them the best chance of success.

Great, thanks.

We'll take our next question from Jason Bazinet with Citi.

I just had two quick questions. At least the first one's for Mr. Maffei, and whoever wants to answer the second one. In your prepared remarks regarding the Trip spinout of Liberty Ventures, you suggest that you expect to complete it in August or September. And I didn't know if that was complete the S-1, or if that's actually a complete spin of Trip.

I'm going to let our General Counsel explain the intricacy here.

It would be completing the entire spin within August or September.

Okay.

But dependent on getting some things completed, while the numbers are not stale. That's the issue.

Okay. My second question is on Liberty Interactive; maybe this is for Mr. George. The SG&A line seemed a bit elevated, at least relative to our forecast in the quarter. Was there anything special about that, or are we just bad modelers? Thanks.

Nothing really out of the ordinary. We did have some investments in a few areas. We've wrapped up our online marketing somewhat. We're testing some new approaches to invest in online marketing. We had some investments in looking at some potential market expansion opportunities -- some things we're doing on the technology front.

So, not one single issue. Some of it is a little bit of timing of when expenses hit in the year. Our general goal is to continue to manage this business in a way that we can get OIBDA margins to expand slightly faster than revenue. And so we're kind of still on that overall path, but we did have a few bumps in the quarter, but nothing -- not one big thing driving it.

Thank you very much.

We'll go next to Matt Nemer with Wells Fargo Securities.

Thanks so much. Good afternoon. Just following up on that last question -- Mike, can you talk a little bit more to the expense pressure in online marketing? Is that overall marketing costs that are getting more expensive, or is it more related to things that you're testing?

It's a little more the latter, but let me maybe ask Claire to talk a little bit about some of the initiatives in the US on online marketing, where more of the pressure's coming from.

Yes, happy to do that. So, two things are happening with online marketing. One, as the digital piece of our business becomes greater and greater a percent, online marketing is growing with that, in ratio.

But we have also been doing some experimental outreach in new channels beyond our typical paid and SEM. So, affiliate expansion, comparison shopping expansion, et cetera. And some of those are working and some of them have not returned quite at the rate that we expected, so we continue to push at that to find the right balance.

Okay. That's helpful. Thank you.

And then secondly, for Mike, could you give us a little bit of a road map as to where and when we should start to see some France start-up expense in the P&L?

Certainly, if you look back at kind of our experience in Italy, that's probably a decent indicator of the pattern that you're likely to see in France. So, we would expect -- there was a little bit of expense in this quarter but not significant. I think you'll see expenses ramping up as we go through this year, and start to bring on staff and incur other expenses. Without giving a precise number, I think you're going to see, let's say, in the order of $8 million to $10 million of expenses over the back half of this year.

Okay, great. And then just lastly, for Greg, I'm just curious, as we look at the Digital Commerce assets, they've struggled a little bit from a profit standpoint. Is there a common theme among them, or is this more Company-specific issues at each?

A little of each, probably. I can think that in some cases you've seen Company-specific issues, but in general there are also some trends. We need to build scale. We are in some niche-oriented products in general.

But the power of transparency on the Internet, the increasing scope of some of our competitors, has meant that, in general, the trend is: We need to build scale. And I think you see the FTD transaction as an attempt to do that. We're considering other ideas on how to build scale in that space.

Great. Very helpful. Thanks so much.

We'll go next to Barton Crockett with FBR Capital Markets.

Great. Thanks for taking the question. On the $350 million from the Trip spin that you said would be used for repurchase, you highlighted that that could be used at Interactive or at Ventures, but you now have an authorization at Ventures. You're leaving both as possibilities. Is it more likely, in your mind, to be one or the other, or is it truly an open question, who gets it?

From a pure allowable standpoint, either party can use it, and, therefore, we created optionality around either. As is our practice, we tend to report our share repurchases at quarter end, and we're probably unlikely to tip our hand. We haven't bought back any at Ventures; that's a fact. And we have bought back quite a lot at LINTA, which will effectively be QVC. So, you can make your own judgments.

Okay. Great. And then, turning to QVC, I was wondering if you could talk about, Claire perhaps, what the market expansion versus market share dynamics are, with you guys launching QVC 2 and the over-the-air expansion into more homes. Are you growing the market or are you taking share from others like HSN, do you think?

Thank you for your question. What we've seen is a little bit of both. We are very careful about how we gauge our incrementality to our main channel, and we have been pleased with both QVC Plus and OTA. It has performed as we modeled.

And then we do see, pretty consistently, that our Q Plus, our second channel, does create a share pressure on other competitors in the TV shopping space. So, a little bit of both going on.

Okay. Great. Thank you.

We'll take our next question from Alex Fuhrman with Craig-Hallum.

Great. Thanks for taking my question -- was hoping to talk a little bit about the programming content strategy at QVC. It seems like, over the course of the year, been a lot of format that involves a lot of different product from different categories on the show, particularly the morning talk show format. I was wondering if you could talk to that. As you bring more vendors and more brands into the platform, is that kind of a new, ongoing way to work with a wider range of brands and vendors within a given period of time?

And related to that, as your customer base continues to migrate a little bit more online, and you start to add more vendors, has your percentage of business that's been trending offline -- has that deviated or continued to move higher in the quarter?

Claire, do you want to take those questions?

Sure. Happy to do that, Mike. Our programming strategy evolves every year, but I would say it remains pretty consistent to the success formula, which is both to combine sort of serendipitous discoveries -- so a constant flow of new products in different categories; our customers love us for that. But also, we have learned that there is certain static programming where a customer can make an appointment and knows what to expect, has also been successful. We push hard at both of those. They're pretty true to a formula that's worked for a long time.

As far as online, yes, our Business for several years now has continued to see more of our sales coming through the digital platform. Our media, our channels still drive a lot of that activity, and we've learned how to integrate the experience. But we do continue to see more of our business moving to online year after year.

That's helpful. Thank you very much.

We'll take our next question from James Ratcliffe with Buckingham Research.

Thanks for taking the question. Can you just give us a little color on what remains in what is now, I guess, or could potentially be Liberty Digital -- just how much the EBITDA impact of the departure of the Provide Flowers business would be, and any color about how the revenue splits up, at least among the major product lines there?

Also, are there any tax implications associated with the sale, and any other tax implications associated with any of the other businesses, in terms of limitations on selling them that are currently, at least in the moment, allocated to Liberty Digital? Thanks.

James, that's a broad question -- a lot of them. I'll try and take the easy ones.

The FTD transaction, at the time it was struck, was just a little under our basis -- depends on where it actually closes. Where it traded initially is over our basis; we'd have a slight gain. That will be very much dependent on how much cash gets generated in the interim at Provide, and what its balance sheet looks like as we get some sweeps on that -- their working capital adjustments and where the FTD stock price closes when the deal closes -- where the FTD stock price trades, rather.

On the magnitude, I'll give you a percentage. It was roughly about -- historically -- and it's had some challenges this year because of the poor weather around Valentine's Day. It's in the 40% to -- 35% -- 38% to 42% of the EBITDA, something like that, of the whole entity. That's moved around a little. Some of the other things have been more volatile. This year, it will be lower than that percentage.

Historically, it might have been the case, it was a little lower back in like 2011 because some of those other businesses were stronger, but it's done pretty well in 2012 and 2013. So, it would have been in the low-40%. I don't believe we've pulled out the guidance directly for the totality of the businesses, so I'm not going to begin by doing that today. I'm just going to give you that range.

As far as the other big drivers in there, the biggest businesses after Provide, which was the biggest, would be -- by EBITDA, would be CommerceHub and Bodybuilding, which are roughly the same size. And they would be slightly smaller -- 5% or 10% smaller contributors than Provide.

The basis in a lot of those businesses varies -- very low basis in some -- CommerceHub I think has a very low basis. Bodybuilding has a fairly low basis. Backcountry has a slightly higher basis compared to, probably, its value.

Great, thank you.

We'll go next to Matthew Harrigan with Wunderlich Securities.

Thank you. I got one, more or less, windy question, and then a couple follow-ups. If you look at the JD.com prospectus, one of the consultancies had Chinese Internet sales growing mid- to high-20s for the next four or five years. I think that the TV market, as you outlined at your QVC Analyst Day, has only got 2% of those numbers, and it's very nascent. I know that the boundaries merge over time, especially in Asia.

Do you think that -- forgetting about your share, do you think you can grow at that type of rate? You have the law of small numbers working for you, and increasingly I know your Business is going to be a little bit more like theirs with a lot more of a social media, communal vantage point.

It's a little early to say. We're very bullish in total about the potential in China. Initially growing really with a kind of classic TV shopping model, and then, over time, layering on a eCommerce model.

So, if I were to separate those two things, we clearly benefit today by the big growth in carriage, which is bringing a lot of new customers to our channel. Although we've been very pleased to see a lot of new customer additions, not just from the carriage we've added recently, but even the carriage that we added over the last few years. So, we see a lot of room to grow TV homes, get more carriage, and to continue to bring in new customers off of both existing and new carriage. And hope that that can fuel some growth for the long term, coupled with increasing repeat purchase rate.

The whole eCommerce side is really untapped right now for us. We do -- only about 2% of our business in China is transacted online. And I think in what's still a fairly immature market for both TV shopping and eCommerce, I think customers draw a fairly kind of hard distinction in their mind between the two formats. You don't see the kind of blending of the two that we've seen in our other markets around the world.

So, it's an area that we're going to really turn our attention to, and figure out if there's some ways to add really meaningful incremental growth through eCommerce on top of the core TV platform. But on that front, I would say, again, early days -- a lot to figure out. But we think, at least over the midterm, we've got a lot of runway just in continuing to expand engagement through the TV platform.

Then just actually just one other. When you look at Europe, there's some laggard economies that actually have some pretty competent retailers, like Spain. I think I asked you once before about how you would look at the French retailing market relative to Germany or Italy. The consumer behavior can really vary, as you pointed out with Germany, on the fashion and the returns.

But can you point out any quirks or any comments on the French retail market? I mean, obviously you've got all those big luxury houses. I don't know how much that affects QVC's perception among the consumer, but just if you had any incremental thoughts.

I don't know that I have a lot to add. I don't think the presence of the big luxury houses has sort of meaningful impact on us one way or the other. It's clearly a market that is stronger in eCommerce, I would say; not as strong as some markets, but relatively strong in eCommerce, and much stronger than Italy. So, we think that's an incremental positive for our business.

It is clearly a market oriented towards nameplates and prestige brands. And there really hasn't been the availability in any kind of a home shopping environment -- TV shopping environment -- of better quality products. So, we just think, coming in, not necessarily playing at the high luxury end, but just playing in sort of better and best beauty as an example, which is typically not been available in a video format. I think those are things we can do in a differentiated way.

So, we're bullish about the market. It is a consumer-oriented market, but early days. I think we've learned that you can have a lot of preconceptions going into a market, and once you're in, you need to do a lot of rapid adjustment to see what works. We think sort of the underlying fundamentals look promising to us.

Thanks for taking my questions.

We'll go next to Victor Anthony with Topeka Capital Markets.

Thanks. Greg, just one question on HSN -- if you could update us on your thinking about the ownership. I know in the past you've expressed dissatisfaction with their capital structure. I think the market understands that there's an opportunity for them to address that pretty soon.

Second, maybe you could just -- this is for Claire. What's behind the continued weakness in electronics, and any chance of that improving over the next several quarters? Thanks.

So, I think, you've seen the case where HSN has -- I think its stock has been relatively weaker. And I think one of our views is: They are in the same marketplace we are, which isn't always easy, but it has not helped their performance by their capital structure, which is, in our judgment, way too unlevered from a financial perspective. I think we've made that case in the past. I think that remains our view.

That having been said, we sit with 38% of the Company. We're happy with that position. In general, we've done well with it. We've taken some actions to synthetically create leverage in exchange for what we did. We'll see what actions they take going forward.

Yes, from a --

Claire, do you want to address -- go ahead, sorry. Go ahead, Claire.

Sure. From the electronics category, the weakness in the first half of the year has really been two-fold. One is a real lack of innovation coming from the industry; so, no real newness in tablets or computers or televisions. That's one reason. And the other is the lack of inventory. Typically, even in a non-innovative state, we've been able to create a lot of value for our customers through opportunities in the market, and it just hasn't existed.

As we look forward, I would say we are cautiously optimistic about some opportunities. We've seen both the introduction of tablets and also Android growth, and now the Bing book is something that we think could create some opportunities for us. But we are planning it cautiously at this point.

Thanks. Just a quick follow-up: Greg, when you say the timing has been delayed for the QVC Group tracker, should we still expect this to occur in 2014?

I'm not prepared to make an announcement in any way today. That would be our hope and goal, but I'm not prepared to lock down any timing.

Okay, thank you very much.

We'll take our final question from Ben Mogil with Stifel.

Good afternoon. Thanks for taking my question. If you touched upon this earlier, I do apologize. On the return rate increase in the US, is it just a mix shift, or is there anything deeper going on?

Claire, do you want to take that?

Sorry, Mike. In the US, the return rate is a mix issue.

And so, from an inventory perspective, do you think this bleeds a little bit into 3Q? I'm not asking you to give guidance, but just from a directional perspective, or is it contained, if you will, to 2Q?

What I would say is that the categories that we've seen strength will most likely continue in the third quarter.

Okay. Great. Thank you very much.

There are no further questions at this time. I'd like to turn it back to our speakers for any additional or closing remarks.

No, I think we're good. Thank you, operator. Thank you, everyone, for joining our call, and thank you for your continued interest in Liberty Interactive.

This concludes today's conference call. Thank you for your participation.