Dive Brief:
- Qurate Retail Group, the parent company of QVC and HSN, said Wednesday that it has sold its Zulily e-commerce unit to Regent, a Los Angeles-based global investment firm.
- Qurate said the divestiture will allow management to focus on QVC and HSN, and the Cornerstone Brands.
- As part of the deal’s terms, Qurate repaid Zulily’s $80 million in outstanding debt. Based on the terms of the sale agreement, the company said there is potential for Qurate Retail to receive an earnout in future years. The company did not disclose additional details of the deal including its sale price.
Dive Insight:
Qurate said Zulily’s sale is part of the company’s strategy to optimize its brand portfolio.
“We are in the midst of a turnaround at Qurate Retail,” President and CEO David Rawlinson said in a statement. “This divestiture will allow our management team to better focus on our core video commerce assets, QVC and HSN, and the Cornerstone Brands, while preserving liquidity to further strengthen our balance sheet.”
Qurate acquired Zulily for $2.4 billion in 2015. But Zulily recently hasn’t performed well. The unit has regularly posted the largest declines and losses in revenue within Qurate’s brand portfolio.
Zulily’s revenue fell 17% in the first quarter to $192 million from $232 million a year ago. The business unit also posted a Q1 operating loss of $43 million.
Qurate’s Q1 revenue fell 8% to $2.6 billion, the company said earlier this month. Overall, the company reported $176 million in operating income and $20 million in net income for the three months ending March 31.
“In the first quarter, we saw meaningful improvement in revenue trends at our largest businesses, QVC US & QVC International, while performance remained soft at HSN, Cornerstone and Zulily,” Rawlinson said in a May 5 earnings announcement. “Our customer file continues to be pressured and while we have multiple efforts underway to re-activate customer groups, we expect the impact of these initiatives to take several quarters.”
Zulily’s revenue saw a revenue decrease due to lower shipping and handling revenue as a result of reduced site traffic. The company said Zulily’s operating margin and adjusted OIBDA margin decreased in Q1 due to lower product margins resulting from promotional activity, increased marketing and higher inventory obsolescence expenses. Lower fulfillment and administrative costs partly offset those pressures, the company said.
In March, Zulily laid off an undisclosed number of people on its corporate teams. The latest round of Zulily layoffs in March were separate from a 12% reduction in Qurate’s staff in late February. That round of layoffs mostly affected the company’s QVC and HSN brands. Zulily also let people go in 2022 as part of a larger transformation strategy that included closing a fulfillment center in Pennsylvania.
Despite those pressures and setbacks, “Zulily has been a trailblazer in using technology to create a compelling online customer experience,” Regent chairman Michael Reinstein said in the acquisition announcement. “Their revolutionary logistics and fulfillment network has also set a new industry standard, and we are excited to leverage its immense potential to grow the Zulily business in new markets.”
Zulily sells a variety of merchandise, including baby items, men's and women’s apparel, beauty and home decor. Pennsylvania-based Qurate Retail describes itself as the largest player in video-driven shopping. The company has 14 TV channels and also reaches customers through streaming, mobile apps and brick and mortar locations.
Regent’s current portfolio of retail brands includes Playtex, Escada, Intermix, Drybar, La Senza and Club Monaco.
