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Shares of media conglomerate Liberty Interactive (NASDAQ: QVCA) tumbled on Tuesday following a disappointing second-quarter report. Total revenue slumped due to weak sales from broadcast network QVC, and net income dropped as well. The stock was down about 10% at 11:30 a.m.
Liberty Interactive's QVC Group reported second-quarter revenue of $2.35 billion, down 3.2% year over year and $50 million below analyst expectations. Consolidated revenue from QVC was down 4% year over year, or down 3% adjusted for currency. QVC's U.S. revenue slumped 4%, with a system outage responsible for a 1% negative impact, while QVC's international segment posted revenue growth of 2%, adjusted for currency.
QVC will soon be joined by HSN, with Liberty Interactive agreeing in July to buy the 62% of the company that it doesn't currently own. The transaction is expected to close during the fourth quarter of this year, creating a home shopping powerhouse.
Adjusted net income for the QVC Group was $188 million, down 14% year over year. QVC CEO Mike George discussed plans to return the company to growth: "We are executing on a number of strategies that we expect to restore healthy growth, with a particular focus on greater diversity and newness in our assortments. We were delighted with the strong performance of our International segment, which was led by QVC Japan."
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In addition to acquiring HSN, Liberty Interactive agreed in April to merge with General Communication. Certain Liberty Ventures assets will be merged with General Communication, forming a new company, GCI Liberty. At the same time, Liberty Interactive will be renamed QVC Group and become an asset-backed stock, comprised of QVC, HSN, and zulily.
After the dust has settled, the new QVC Group will be faced with the challenge of returning to growth at a time when e-commerce's share of total retail sales is increasing. E-commerce will be part of the strategy, but weak sales at QVC during the second quarter gave investors a good reason to be skeptical.
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