QVC Group Inc (QVCGA) 2018 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Qurate Retail, Inc. 2018 Q1 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded, May 10.

I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Good morning. This call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, stock repurchases, future financial performance, market conditions, the integration of HSN and expected benefits and synergies, future impact of accounting changes, the impact of recent tax reform, expected benefits in the sale of ILG, future expenses at QVC, sales demand, customer growth, 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, market conditions conducive to repurchases, the availability of acquisition opportunities, competitive issues, regulatory issues and continued access to capital on terms acceptable to Qurate Retail.

These forward-looking statements speak only as of the date of this call, and Qurate Retail expressly disclaims any obligation or undertaking to disseminate any updates or revisions of any forward-looking statements contained herein to reflect any change in Qurate Retail'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, adjusted net income and constant currency. The required definitions and reconciliations, including preliminary notice in Schedules 1 through 3, can be found in the earnings press release issued today, which is available on our website.

Today, speaking on the call, we have Qurate Retail President and CEO, Mike George; CFO, Mark Carleton; and Executive Chairman, Greg Maffei.

Before we begin, we recognize this is a very complicated quarter for our reports given a few things. It's the first full quarter with HSN results, the reattribution and GCI split-off occurred intra-quarter on March 9 and the impact of accounting adjustment. We provide comparable results in the press release and note relevant adjustments throughout. We'll do our best to help you work through these adjustments on this call and are happy to follow up as needed.

And with that, I'll hand the call over to Mike George.

Thank you, Courtnee. We were pleased to complete our first quarter as Qurate Retail. We've continued to work on the integration of HSN, and I also state more broadly about how we operate as a global organization, operating, engaging, and shopping experiences across our brands and geographies.

We'll share more at our Investor Day, but rest assured, we've remained focus on driving long-term shareholder value by first focusing on the fundamentals of instilling strong operating practices and principles across the company and capturing the targeted cost synergies; second, making sure we deliver every day on our brand promises, bringing joy to our customers through compelling and differentiated products and inspiring shopping experiences; and then finally, accelerating growth by expanding our relevance and our reach to the new customers and new platforms.

We were pleased to deliver another quarter of positive customer growth and positive sales growth at QVC along with outstanding top and bottom line performance at zulily. While the HSN and Cornerstone results remain challenged, we are confident in our ability to effect a turnaround at both. Similar to our comments about QVC U.S. when we experienced a disruption in 2016, we expect this turnaround process will be a matter of quarters, not months and not years.

As discussed on the year-end call, we adjusted revenue recognition in accordance with new accounting standards related to recognizing revenue at the time of shipment rather than delivery; and second, recognizing branded credit card income as revenue rather than as an offset to SG&A expense.

We've also excluded transaction costs related to HSNi from our adjusted OIBDA as presented in our earnings release and discussed on this call. Throughout my comments, unless noted, I'll discuss Q1 results for QVC U.S., HSN and zulily as if the credit card income remained and offset SG&A expenses as it was in 2017. We believe this provides the most comparable view of our year-over-year performance.

We did not adjust our results for the change to recognize revenue at the time of shipment because this impact is expected to balance out over the course of the year. Our reported results and the impact of the revenue recognition changes are included in our earnings release issued this morning or in our SEC filings.

Now let's look at each segment, starting with QVC U.S. Net revenue increased 2% on strong 8% volume growth and 4% lower ASP, our third consecutive quarter of solid sales growth. Net revenue was also impacted by a net $90 million unfavorable returns adjustment, which negatively impacted revenue growth by about 150 basis points. This adjustment primarily reflects comping and reserves released in Q1 of 2017 as our 2016 returns actualized at a lower-than-expected rate.

Operating income increased 26%, primarily reflecting lower purchase accounting amortization. Adjusted OIBDA declined 3%, primarily driven by 3 factors: first, the returns adjustment, which reduced adjusted OIBDA by $10 million; second, the change in bonus accrual methodology, as discussed on our Q4 earnings call, which was $5 million unfavorable; and third, the impact of ASP deleverage, which I'll discuss momentarily.

I'd also note that the adoption of the new accounting standard around recognition of Q Card revenue impacted reported margins by approximately 40 basis points. We continued to increase our marketing spend in the quarter given favorable performance. But these investments were more than offset by favorable bad debt expenses.

The U.S. team stayed focus on executing the key strategies previously discussed to sustain growth, including driving balanced sales growth across categories, increasing product freshness, increasing customer engagement across platforms and attracting new customers. We delivered sales gains in all categories, except jewelry and electronics, and we introduced 125 new brands, a 7% year-over-year increase.

We saw particular strength in accessories, led by footwear brands Alegria, Vionic, Earth Brands and Skechers and newer brands Fly and Taryn Rose. Handbag returned to strong growth, driven by Kipling, RADLEY London and Dooney & Bourke. And we saw continued strong growth from Cuddl Duds and proprietary brand AnyBody in loungewear.

In apparel, we saw strength from newer brands NYDJ, Laurie Felt, Belle by Kim Gravel, Peace Love World and Du Jour. We are also delighted with the launch of the Vince Camuto lifestyle brand with strong results across footwear, handbags and apparel and the premiere of Brooke Shields' new fashion line.

In beauty, we continued to diversify and broaden our assortments while also focusing on our core volume-driving brands, made good results from long-standing brands like Peter Thomas Roth, IT Cosmetics and Supersmile as well as success with newer offerings such as Crepe Erase, Toni Brattin, Westmore Beauty and Sara Happ. We're seeing a nice uptick in beauty devices as well with Clarisonic, Calista, MicrodermMD and Dyson.

While our jewelry business continues to decline on reduced airtime, we were encouraged by strong gains in productivity and some new pockets of growth in areas like Imperial and Italian gold, Italian silver and Jade by John Hardy, along with the lines of Stephen Dweck and the Grace Kelly Collection.

In home, we saw strength in floor care with key items from Shark, iRobot and Dyson; in cookware, with proprietary brand Cooks Essentials, along with Le Creuset, Vitamix and Oster; and in gourmet food, which continues to grow rapidly. Home decor expanded with the success of newer brands like HomeWorx By Harry Slatkin, Catherine Zeta-Jones and Scott Brothers, along with outstanding results from our proprietary Valerie Parr Hill brand.

In electronics, we continued to see strong gains from Apple and from a number of smart home offerings, including Ring, Blink and Nest. However, these gains were offset by softness in computers and tablets.

And finally, our Martha Stewart business continues to grow and expand across apparel, beauty, cooking, food and gardening, among other categories.

Now earlier, I mentioned the ASP pressure we've been experiencing. These declines are driven by a lower mix of electronics and jewelry, our highest ASP categories, but also by specific product trends within categories, such as the shift from computers to smart home and the growth of loungewear and fashion, which carries lower price points.

But we don't typically manage the ASP. We have put heightened focus on finding ways to moderate these declines while still ensuring that we're offering the customer what she wants to buy, looking carefully at both our mix of items offered and the frequency of offers at various price tiers. We're also looking selectively at where we have opportunities to move prices while still offering a compelling value. With these actions, we do anticipate moderating pressure on ASP in the back half of the year.

We continued to be encouraged by the strong customer engagement across our platforms. On broadcast TV, total viewing minutes increased 6% on QVC and QVC2. That's the fourth consecutive quarter of broadcast viewership gains. In addition, viewership on digital and interactive platforms grew strongly. Digital sessions rose 11%, and the number of unique visitors grew 8%, resulting in total e-commerce penetration rising 240 basis points to 56% of revenue and mobile orders growing 380 basis points at 65% of e-commerce orders.

We continue to expand our reach on merchant platforms as well. We've had 1.2 million net downloads of our Roku app as of quarter-end. That's 100% year-over-year increase. On Facebook Live, we simulcast approximately 800 hours per month in Q1, with video views more than doubling and minutes viewed increasing 240% from the prior year.

This strong customer engagement is a testament to our ability to adapt to changing consumer behavior. Combined with increased marketing spend, we were able to deliver another strong quarter of new customer acquisition, attracting nearly 440,000 new customers, a 2% year-over-year increase. And 81% of these new customers made their first purchase on digital platforms.

Looking ahead to Q2. We do anticipate continued pressure on adjusted OIBDA margins in the U.S., driven by the ASP declines as well as comping some additional returns reserve release from the prior year and the change in the bonus accrual methodology. That said, we remain confident in our ability to maintain relatively stable to improving OIBDA margins over time and expect favorable rates to prior year in the back half, which includes the benefit of the bonus methodology change.

Looking now at QVC International. We posted our 15th consecutive quarter of positive constant currency revenue gain. Revenue increased 2% in constant currency at 2% volume growth and 1% higher ASP. We also increased the number of new customers 3% in the quarter.

Our U.K. business generated solid sales gains in Q1, continuing the rebound that started in the second half of 2017. In Japan, while sales growth rate slowed from previous quarters, that which we believe was largely due to the impact of Olympic viewership on February sales, the team continued its streak of year-over-year sales gains. And Germany also delivered solid sales growth.

International operating income margins expanded 160 basis points, largely due to reduced purchase accounting amortization. And adjusted OIBDA margins declined 70 basis points, driven by a combination of lower product margins, due primarily to a mix shift to electronics, higher freight expenses in the U.K. and Japan due to rate increases and higher fixed costs. These are partially offset by a reduction in marketing expenses.

Our joint venture in China produced another strong quarter. Local currency revenue increased 11%, and we were profitable for the third consecutive quarter. At HSN, revenue declined 10% in Q1 on 6% lower unit volume and 5% lower ASP. We experienced declines in all categories except beauty. ASP declines were primarily driven by a product mix shift away from electronics, which typically carries higher price points.

Operating income decreased primarily, reflecting purchase accounting amortization associated with the acquisition. Adjusted OIBDA decreased 10% primarily reflecting higher inbound and outbound shipping costs and deleveraged the fixed cost due to the lower sales. Despite these challenged results, however, we achieved higher product margins, lower personnel expenses driven by integration-related synergies and lower bad debt expenses. In addition, S&H revenue declined partially in line with sales. That's a significant improvement from the downtrending over the last few years.

The overall sales decline at HSN reflects both the underlying challenges that that business has faced over the last couple of years, compounded by distraction from the transaction and the leadership transition following acquisition. Among other challenges, there were simply insufficient purchase orders executed in the back half of 2017 to effectively support sales in the first half of 2018. We anticipate that it will take until the third quarter to achieve meaningful changes in sellable inventory levels.

Despite the disappointing top line results, we were encouraged by a number of bright spots. We're seeing momentum in the beauty space, along with an improving gross profit margin. This is an area of focus, building off key learnings from QVC's experience.

The team is focused on bringing a better balance to the beauty portfolio and maximizing productivity, including increasing enrollments in the auto-ship program and focusing on the most productive brands as well as new skincare and beauty device launches. The Best in Beauty 7-day digital event was a success. And in April, HSN exclusively launched Lancôme's Rénergie Multi-Glow with Isabella Rossellini.

Additionally, with an eye on growing the food business and continuing to provide a platform to introduce amazing chefs to a broader audience, the team successfully launched Symon Home by Chef Michael Symon. We've also selectively taken some of the strongest national kitchen and cook brands from the QVC lineup and -- introducing them to HSN. We began with KitchenAid online in Q1 and on-air in May. We'll also be launching Keurig and Vitamix in the coming months.

While we're committed to maintaining healthy brand differentiation between QVC and HSN, we do believe we can maximize the performance of top-tier national brands by carrying them on both networks and optimizing the programming time which provides the customer with more choice.

As we work to turn the HSN business around, we're focused on strengthening key operating fundamentals, including building more balance across categories and product assortments, introducing new brands and items, airing more items and more brands per hour and day, moderating promotional intensity, improving on-air presentation, advancing our online assortment and managing costs. While there's considerable work to be done, we are confident in our plans to address the underlying issues and return to healthy business growth. And we look forward to sharing more with you at our Investor Day later this month.

The zulily team built on the momentum that began in the second half of 2017 and delivered an outstanding first quarter. Revenue increased 17% on 12% order growth, driven by continued strong gains in the customer base. We ended the quarter with 6.1 million active customers. That's a 24% year-over-year increase. The strong customer growth reflects continued progress refining marketing strategies and tools, along with a strong focus on creating compelling events every day and enhancing the customer experience.

Operating loss improved 26% and adjusted OIBDA grew 80%. Adjusted OIBDA margin expanded from 4.2% to 6.4% due to fixed cost leverage from high top line growth and more productive marketing spend. Based on the current encouraging results, we believe there's an opportunity to test higher levels of marketing spend in order to fuel even additional growth while still, of course, monitoring carefully the quality of incoming customers.

The accounting change relating to recognition of zulily-branded credit card income did not materially impact the quarter results, but I would note that the change in accounting standards to recognize revenue at the time of shipment rather than delivery did have a more significant impact on zulily than our other businesses.

Under the prior accounting methodology, revenue would have increased 14%, operating loss would have decreased 13% and adjusted OIBDA would have increased 47%. zulily's cost of sales as a percent of revenue was 73.7%. That netted up compared to prior year by 40 basis points. The increase was largely driven by increases in fulfillment and transportation costs due to expansion of China direct shipping, a higher drop-ship mix and international growth.

The supply chain team remains focused on optimizing the fulfillment network and improving productivity. And while we anticipate continued pressure in Q2, we remain confident that we'll see improving costs in the back half of 2018 compared to the prior year.

In addition, the work of the merchant team to curate the product she wants at an appealing price point was evident by both the double-digit revenue growth and approximately flat ASP. That's a significant improvement from the trend of declining ASPs that we saw last year, and that relieved some of the margin pressure.

zulily added roughly 50,000 new branded credit card accounts in the quarter, bringing total accounts to about 160,000 since the September launch. We're encouraged to see that the new branded card customers are seeing value in the program with more frequent purchases and larger order sizes compared to non-zulily card customers.

We're excited by the strong revenue and customer growth that the zulily team is generating, and I look forward to building on that momentum for the remainder of 2018 and beyond.

At Cornerstone Brands, sales declined 8%, operating loss increased and adjusted OIBDA fell by $3 million. Sales were negatively impacted by weakness in the home segment. Frontgate and Grandin Road's outdoor businesses were especially challenged and we believe in part due to unusually cold weather in March, along with efforts to reduce promotional intensity and increase regular price sales.

Catalog circulations decreased 6%, consistent with ongoing efforts to shift marketing investments to the digital and retail platforms. The increase in operating loss was primarily driven by purchase accounting amortization, and the adjusted OIBDA decline was driven by lower sales, partially offset by lower operating expenses.

On a positive note, Garnet Hill achieved a record Q1 financial performance, capitalizing on the brand's strong momentum over the last several quarters.

Looking forward, we remain confident in the potential of the Cornerstone home brands. The team is focused on establishing a clear and elevated position for each brand, developing innovative and differentiated product that can't be found elsewhere and increasing customer satisfaction and retention. We're also focused on driving sustainable increases in OIBDA margins by optimizing marketing spend across channels and improving gross profit management.

And finally, we continue to make good progress on our HSNi integration and cost synergy initiatives. By the end of April, we had largely completed the organizational integration. In Q1, we had approximately $8 million of a transaction-related expense that's spread evenly across QVC U.S. and HSN.

At the parent level, Qurate Retail, Inc., there was an additional $4 million of transaction-related expenses associated with the split-off of non-Qurate Retail assets. These costs are excluded from reported adjusted OIBDA.

We've already begun to realize immediate synergy benefits. We expect to achieve $35 million to $40 million of expense savings in 2018, which we believe approximately 80% will impact adjusted OIBDA with the reminder -- with the remainder impacting equity compensation expenses. Going forward, we will be looking at synergy realization on a consolidated basis across the businesses.

And with that, I will turn it over to Mark.

Thank you, Mike. As we discussed on the last call and as Mike mentioned a bit today, there are quite a few accounting updates impacting 2018 and I think we ought to go over those to make sure everyone's clear. They are: first, the recognition of branded credit card income for QVC, HSN and zu as revenue rather than an offset to SG&A. We've highlighted these amounts in the press release. And during 2018, we'll discuss quarterly comparisons as if the income were still an offset to SG&A.

Second, we've also began recognizing QVC and zulily revenue at the time of shipment rather than delivery. This had a modest positive impact at QVC with a bigger impact to zulily in Q1, which we expect will be neutral on an annual basis. We've not adjusted numbers for this change.

Lastly, we've changed our methodology for incentive compensation accruals at QVC in 2018. We'll now accrue incentive compensation more equally throughout the year, which will result in a headwind for margins in the first half of 2018.

Four other items I'd like to point out. First, we've included pro forma results in the press release that reflect HSN and Cornerstone's historical results for the prior periods to help with comparability. We've also reflected the impact of reattribution as of 1/1/18 in certain tables for comparability purposes.

Two, we expect our effective tax rate for 2018 to be in the range of 20% to 23%, excluding the impact of onetime items. Three, we've included a revised adjusted EPS in our earnings press release, excluding the impact of purchase accounting amortization net of deferred tax benefit, mark-to-market adjustments on certain public debt and equity securities and other onetime adjustments. Please look at Schedule 3 for more detail. And fourth, unallocated corporate costs were modestly elevated in quarter 1 due to legal costs as we completed the split-off.

Now let's take a look at the liquidity picture. At the end of the quarter, Qurate Retail had attributed cash and liquid investments of $1.1 billion and $8.4 billion in principal amount of debt. QVC's total debt to adjusted OIBDA ratio, as defined in QVC's credit agreement, was approximately 2.5x, which includes zulily's adjusted OIBDA as compared to a maximum allowable leverage ratio of 3.5. Total leverage for the Qurate Retail Group, which includes QVC, zulily, HSN and Cornerstone, was also 2.5x.

And now I'll hand it over to Greg for some final comments.

Thanks, Mark. We were pleased to complete the GCI Liberty split-off, creating an asset-backed stock, which, as you know, we've now renamed Qurate Retail. From the period of February 1 through April 30, we repurchased $231 million of that Qurate Retail stock. And I'd like to note that post quarter, Marriott Vacations Worldwide announced the acquisition of ILG. And from that, we expect after-tax cash proceeds of approximately $200 million and approximately $325 million of Marriott Vacations' equity. When it's done, we expect to have a stake in Marriott Vacations of just under 6% on a pro forma basis.

We are hosting investors at QVC's headquarters next week, May 22, a week and -- I guess, a little more than a week, Tuesday, May 22. If you'd like to join us in person, please reach out to IR. And as always, we appreciate your continued, if new, interest, by name, in Qurate Retail.

And with that, operator, we'd like you to open up for questions.

(Operator Instructions) And we'll take our first question from Ed Yruma with KeyBanc Capital Markets.

I guess, first, on the H side. I know you characterize the turn there as quarters, not months, not years. I know you also indicated that there was some low order done or low inventory levels. I guess, will results deteriorate, in your opinion, from here before they get better? Or is this indicative of kind of a bottoming of the business? And then as a follow-up, you've had a couple of key management departures at the Q level. I guess, kind of any progress on how we single out replacements? And were there any benefits from any incentive comp accrual reversals?

Thanks, Ed. On the HSN performance, I don't want to necessarily put specific numbers against it, but we would hope that we're certainly close to a bottom. I think it'll take a little while to get certainly to positive growth, but our goal is to try to make every quarter better than the prior quarter. I think we'll start this -- have a sort of a better feel on the impact of our actions by Q3, but don't see the situation materially worsening before it gets better. On leadership replacements, kind of no news announced today, but we continue to make good progress on a couple of the key openings, and we'll expect to have news sometime over the next several weeks. Did you have a third question, Ed?

I think it was incentive comp, Mike. And I think there was not any kind of material impact of any reversals of incentive comp from the headcount changes.

And we'll take our next question from David Gober with P. Schoenfeld Asset Management.

And I guess, 2 questions, interrelated. First, when we look at HSN, how different will the product mix be when the integration of HSN and the revitalization of the business, how different will it be from what it was historically? And how should we benchmark the progress going forward in order to be able to calibrate for ourselves how you're doing in terms of hitting your integration target? And second, given the tremendous amount of free cash flow that the company produces, I mean, we calculate that it's more than 12% yield on the stock. If the integration is progressing according to plan, at what point would you consider potentially changing your debt-to-EBITDA ratio targets with the idea of either making accretive acquisitions to fill in on the business or more importantly, to accelerate stock repurchases, because it looks pretty damn attractive to buy back stock at this price level? So 2 integrated questions.

I'll take the product mix question. I'll let Greg or Mark opine on the other. On product mix, it will certainly evolve and it will evolve in a few ways. We're looking to a better -- trying to drive a better balance across categories. So as an example, the HSN business has a relatively small fashion mix, a relatively large electronics mix. We'd like to see a better balance. We'd like to see a bigger beauty business as well. And so there's some kind of rebalancing across the portfolio so that we're both attracting new customers and getting higher levels of engagement from existing customers. You'll also see us pushing on -- out of the QVC playbook, just kind of more items in a day, more new items in a day, more brands in a day, but also maybe more methodically building reorder businesses, where you really can do very well. And I think, in all of those areas, there would be some evolution of the assortment structure that we'll see over time. And then I think you'll see some sharing of brands between the 2 networks. Again, we want to keep them fairly distinct. But I mentioned some examples where it's a broadly distributed national brand, where we think we can get more total sales by putting the brand on both networks. You'll also see us introducing more QVC suppliers, but those suppliers would be bringing different kinds of brands to HSN. But we think -- I shared an example on the last earnings call of a very big food business we've built at QVC. HSN doesn't have -- has established the food business. There's a lot of supply chain complexity to managing food. So we're working with our partners to develop unique brands and offers for the HSN customer. So expect evolution in the mix of categories, expect more balance over the course of the day and some leveraging of top QVC kind of vendors and partners as well as just introducing other new brands to the company. Mark, do you want to...

Yes, Mike, I'll opine in on this one. Thanks, Rich. So I think you're right to note a couple of things, one, this is obviously a very high free cash flow-generating business, particularly for a retailer. We are in the midst, as Mike has noted, of transition on H. Some of the things we're doing -- and we do expect that they're going to be some quarters of pain ahead while we do that. We are also somewhat constrained or aware of what the rating agencies' expectations are for our leverage level. That having been said, I think our philosophy has been pretty clear. We've been a big returner of capital historically to the stock market and to our investors primarily via buyback. We have looked for accretive acquisitions and probably put that near the top of the list. We'd like to think H and zulily qualify and are consistent with our view of experiential shopping, discovery-based shopping that is differentiated. And if we see other acquisitions in that space that are consistent with our thinking, we will be there. There is a goal to retire some of our debt of different flavors because of the nature of the deductibility that it has and our lack of deductibility out of the new tax law. So we weigh some of that as well. But I think you're right to point out, our biggest use of free cash flow over the last 12 years since this became a separate company has far and away been retirement of equity. And I expect that's going to continue to be the largest source of -- or use, rather, for our cash given -- if we could find other acquisitions, we'd do it, but unlikely to find ones that we think fit as well in the portfolio, so we're likely to be retirers of equity.

And we'll take our next question from Alex Fuhrman with Craig-Hallum Capital Group.

Wanted to ask a little bit more about the jewelry category. Sounds like you've been having some success there just by pulling back on airtime, getting more productivity. Was Qurate aside it -- to what extent you think the increase in productivity has been driven by the reduction in airtime? Is there some amount of just stable demand in jewelry or is it just better selection of brands and curating of the assortment? And what are your plans, I guess, going forward, in terms of airtime for different categories? Are there any categories that you think could be showing enough good signs that you're ready to put more airtime behind them?

I would say, on jewelry, it's a little bit of all of what you just described. I think -- we know that our core customer loves our jewelry offering. It just isn't as important overall in her lifestyle as it used to be. And so we have been trying over the last few years to find that level, having been a very probably overpenetrated business historically at QVC. And so I think the team has done a really nice job trying to understand what the customer would respond to. There's a fair amount of newness in the assortments. The team has done a nice job of kind of programming the jewelry events. These -- one of the challenges is when airtime falls too much, the customer doesn't quite know when to tune in to buy jewelry. Some of her old favorite programs have gone away over the years. And so the team really focused in Q1 on trying to kind of concentrate some of the airtime and events that would be destination events for that jewelry customer. So I think all of that is working to help stabilize and grow the business, at least from a productivity standpoint. In terms of going-forward airtime mixes, we're always trying to stay fairly flexible with airtime. So I wouldn't say if there's necessarily a specific direction where we want to take airtime. We revisit it on an ongoing basis, kind of lean into what's working but also try to maintain healthy balance across the categories. We are pleased that most of the categories are working right now. And so I think the call for us is more to maintain that balance than overlean into any one category.

And we'll take our next question from Barton Crockett with B. Riley FBR.

Okay, great. I guess, a couple of things I was very interested in. One, I think, last quarter, you guys gave some very interesting color on time viewing new customers, which were kind of at a positive metric. We're not hearing that this quarter. But I was wondering if you could elaborate if there's any meaningful change from what we were seeing last quarter on those counts?

I'm sorry. I missed that. What -- say again what you're referring to.

So you were talking about time people spent viewing, which I think was a constructive metric from the fourth quarter as well as the number of new customer additions, which were near historic highs. And I was wondering if you could update us on what we're seeing now. Is that -- has those positive trends changed this quarter versus last quarter?

No, those have continued positive. I did mention we're seeing viewing minutes -- total time spent viewing QVC is up 6%. So it's actually one of the steeper growths we've seen. So we feel very good about time viewing QVC. And that 6% is just on our 2 main platforms, the QVC and QVC2. If you added in Beauty iQ, which we don't currently have data on, and if you add in OTT, you've got -- that 6% would be a bigger growth rate. So feel very good about viewership engagement. And then on new customers, up about 2% in the quarter. And so continue to see nice new customer momentum that we now have for about a year.

Okay, that's helpful. And then a question about the margins. You quantified some of the margin impacts, but the delever, how much of an impact on the ASP declines, how much of an impact on margin OIBDA was that in the quarter? And additionally, you talked about the expectation for the synergies. How much of that did you have this quarter and how much is still to come?

So on the margin impact from ASP deleverage, if you see -- the principal impacts are, as you would expect, on our distribution costs, our freight cost -- sorry, warehouse costs, our freight costs than a little bit just on the credit card line is your paying transaction fees on the cards for more units. It's hard to give a really precise measure of all those impacts and it plays a little bit on how you look at it. But I think it's safe to say it's in the range of around 40 basis points of impact across those line items.

And in terms of the synergies, how much have you realized in this quarter versus what's to come?

Yes. We're looking at $35 million to $40 million for the full year. And I believe, in this quarter, it was $4 million.

Okay, so a lot yet to come. Yes, I think that's good for now.

We'll take our next question from Tom Forte with D. A. Davidson.

So Mike, I wanted to ask you the question that I get asked most by investors. There was some speculation in the quarter that Amazon might be considering looking at Amazon Live. So I would love your thoughts on that.

Thanks, Tom. We -- yes, we did see that speculation. It's -- I don't really want to speculate on what Amazon is or isn't going to do. As I've said many times in response to all questions Amazon-related, we feel good about our strategy, good about our unique positioning. We play in a different space with a different kind of strategy than Amazon. I don't really see Amazon -- it's kind of hard for me to believe that Amazon would want to acquire a small competitor to compete directly with what we do. But again, I hate to speculate on what others are thinking. I suspect they would have other uses for broadcast capacity if they ever did choose to go that direction. I would note -- and we're subject to these various Amazon rumors and pronouncements. A few years ago, we saw the big 1-day wallop in the stock price when there was an article published about Amazon launching Style Code Live, which was sort of a video Internet shopping experience that had a fairly short life at Amazon. So these sorts of speculations come with the territory. We're kind of unwavering in our confidence in our business and the direction we're going and don't see those kinds of issues as being material to us.

We'll take our next question from Victor Anthony with Aegis Capital.

So Mike, you successfully rightsized or turned around the QVC U.S. business, surprising most of the skeptics, including myself as well. So I'm wondering if you're seeing the same level of challenges at HSN that you saw at QVC. However, not this -- the turnaround will be more difficult than you anticipated versus what you saw at QVC U.S. That's it for me.

Okay. Thanks for this question. I'm glad we were able to disprove you on QVC U.S. I guess, I would describe the HSN situation as there's probably some maybe bigger challenges than we fully anticipated, but equally offset by bigger opportunities than we expected. So while we're encouraged by -- as we just -- there are a number of kind of indicators of kind of assortment health, business health, brand health that we look at carefully at QVC. We see big gaps at HSN that we can go tackle. So the bad news is that there are those gaps. But the good news is, there are those gaps. And we're confident that as we go after them in a methodical way, we'll see similar results to what we've seen when we had a bump at QVC U.S. when we had a bump in Japan a few years back. A few years before that, we had a bump in Germany. So I think we know how to go at these things. But the difference is obviously, that hasn't operated under a traditional model -- under our traditional model in the past. We don't want to, by any means, totally convert HSN to a QVC model. There are many good things that the team does. But I've been encouraged by the responsiveness, kind of level of energy we're seeing with that team to really learn from each other, great collaboration across the QVC U.S. and HSN teams to figure it out and to go for it. And so it's early enough that I'm hesitant to put a very tight timeline on that turn. But I would say our confidence in the turn as we see these sorts of gaps or differences that we can go fill is quite high.

And we'll take our final question today from Matthew Harrigan with Buckingham Research.

Yes, I was curious. Your Chinese JV is basically around the area, even though it had a pretty healthy revenue quarter. But just being present in that new market, and use kind of a Mike George word, that the learnings you can extract when you look at that market and [NAI], you need the license for retailing and voice interaction and all that. Is there something said for just being near to monitor how that retailing market is developing? And is that some sort of your precursor for some of the changes in some of the other markets, including the U.S. and Japan and Europe? And when you look at the aspects of retailing like that, do you see any real major differences or distinctions across the major markets that you operate in directly?

Thanks, Matthew. I definitely see it that way. It is a very low-cost option to be in an important market and to learn. It's a business where, to your point, it's not meaningful on our total P&L., but we put in a fairly modest investment when we went into the JV several years ago, have never added another cent to that investment and now actually are a few quarters of breakeven or better. So it's a kind of no-cost way to be in that market to learn. Is there a potential down the road to see a really big upshift in the growth of that business and that would be more meaningful? Yes, it's possible. That's a very fragment -- that remains a very immature and fragmented market with many, many competitors. And so as we just sort of stick with it, I suspect you'll see some of that lessen over time. But equally importantly, it is a way to be in the market to see what other innovative retailers are doing, to see what's happening on social platforms. Long before we got engaged in Facebook Messenger, we had a very innovative WeChat application in China. And so I did see some of these different kinds of models like WeChat. It's something we try to learn from. And hopefully, we can take forward to -- take relevant learnings forward to our other businesses.

Thank you, operator, and thank you to all the questioners and thank you for your continued interest in Qurate Retail. As we noted, in a little under 2 weeks, we're going to have an Investor Day in Westchester. If you're so inclined, please reach out to the IR department. If you -- otherwise, we hope to speak with you next quarter, if not sooner. Thank you very much.

Thank you. And that does conclude today's conference. Thank you for your participation. You may now disconnect.