WEST CHESTER, Pa. -- QVC Inc., jolted by lower margins in its core U.S. business and startup costs for ventures outside the U.S., reported first-quarter earnings dropped 31.5 percent before a year-ago nonrecurring item.

In the quarter ended April 30, the TV shopping giant earned $12.1 million, or 25 cents a share, against $17.6 million, or 36 cents, before a special gain a year earlier.

After a gain of $3.9 million from a tax accounting change, net earnings in the year-ago quarter came to $21.6 million, or 44 cents a share.

Net earnings in the latest quarter included after-tax losses of $10 million ($6.4 million, or 13 cents a share, after taxes) to establish electronic retailing joint-ventures in the U.K. and Mexico. About $7 million stemmed from the U.K. operation.

QVC expects these joint ventures to show a loss of $25 million to $30 million this year.

QVC stock, traded over the counter, closed at 31, up 3/8, on Wednesday.

Jewelry represented 36.6 percent of QVC's sales in the quarter. Apparel and accessories accounted for 18.4 percent of sales and home products comprised 42.7 percent.

Barry Diller, QVC's chairman and chief executive officer, said the losses in startup ventures were expected, but "the reduction in margins in our core business during the quarter, without a concomitant increase in sales, was not."

He said sales and margin performance in the last six weeks were positive and in line with expectations.

Operating profits inched ahead 1.3 percent, to $32.9 million from $32.4 million, and sales increased 8.5 percent, to $296.4 million from $273.2 million.

Gross profit margins fell to 39 percent of sales from 41.6 percent. Half the erosion reflected the increase in gold prices that depressed markups on jewelry.

load comments
blog comments powered by Disqus