What happened
Shares of Qurate Retail Group (QRTEA -1.75%)were gaining today after the QVC parent posted better-than-expected results on the bottom line in its third-quarter earnings report, with the company seeming to benefit from tamped-down expectations. As of 11:46 a.m. EST, the stock was up 10.3%.
So what
The company, which also owns HSN and Zulily, said overall revenue declined 4% to $3.09 billion, missing estimates of $3.13 billion.
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Revenue fell at three of its four business segments, including QxH, which is the combination QVC U.S. and HSN, Zulily, and Cornerstone. Zulily sales tumbled 17% in the quarter, and Qurate took a $1 billion writedown on its value. Qurate acquired Zulily in 2015 for $2.4 billion.
At Cornerstone, its portfolio of home furnishing brands, revenue was up 5% excluding discontinued businesses, and QVC International sales ticked up 2%.
Despite the weakness on the top line, operating income increased in all of its segments except Zulily, and adjusted earnings per share rose from $0.37 to $0.42, which was well ahead of the analyst consensus of $0.30.
CEO Mike George acknowledged some headwinds in the quarter, saying, "The third quarter was challenging, with continued sales and Adjusted OIBDA pressure at QxH and Zulily. However, we were pleased to see Cornerstone's continuing operations turn to growth and a further acceleration of growth at QVC International."
Now what
Qurate management did not provide guidance for the fourth quarter, which is its biggest time of the year as the holiday season is about to kick off.
However, with the stock down nearly 50%, the improvement on the bottom line seemed to be enough to satisfy investors. International markets like Japan and Germany have been among the company's biggest tailwinds.
For a company pivoting to e-commerce , Qurate shares look dirt cheap at a price-to-earnings ratio of less than 6, but investors should keep it mind that its revenue is still declining. The $1 billion write-off on Zulily's value doesn't make the stock look particularly promising, either.
