Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business strategies; COVID-19 (as defined below); the impact of the fire at Rocky Mount fulfillment center; revenue growth at QVC, Inc. ("QVC"); our projected sources and uses of cash; the recoverability of our goodwill and other intangible assets; and fluctuations in interest rates and foreign currency exchange rates. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

the impact of the novel coronavirus ("COVID-19") pandemic and local, state and

? federal governmental responses to the pandemic on the economy, our customers,

our vendors and our businesses generally;

customer demand for our products and services and our ability to attract new

? customers and retain existing customers by anticipating customer demand and

adapting to changes in demand;

? competitor responses to our products and services;

? increased digital TV penetration and the impact on channel positioning of our

programs;

? the levels of online traffic to our businesses' websites and our ability to

convert visitors into customers or contributors;

? uncertainties inherent in the development and integration of new business lines

and business strategies;

? our future financial performance, including availability, terms, deployment of

capital and our level of indebtedness;

? our ability to effectively manage our installment sales plans and revolving

credit card programs;

the cost and ability of shipping companies, manufacturers, suppliers, digital

? marketing channels, and vendors to deliver products, equipment, software and

services;

? the outcome of any pending or threatened litigation;

? availability of qualified personnel;

? the impact of the seasonality of our businesses;

changes in, or failure or inability to comply with, government regulations,

? including, without limitation, regulations of the Federal Communications

Commission, and adverse outcomes from regulatory proceedings;

? changes in the nature of key strategic relationships with partners,

distributors, suppliers and vendors;

domestic and international economic and business conditions and industry

? trends, including the impact of inflation and the United Kingdom's exit from

the European Union;

? changes in the trade policy and trade relations with China;

? consumer spending levels, including the availability and amount of individual

consumer debt and customer credit losses;

? system interruption and the lack of integration and redundancy in the systems

and infrastructures of our businesses;

? advertising spending levels;

changes in distribution and viewing of television programming, including the

? expanded deployment of video on demand technologies and Internet protocol

television and their impact on home shopping programming;

? rapid technological changes;

failure to protect the security of personal information, subjecting us to

? potentially costly government enforcement actions and/or private litigation and

reputational damage;

? the regulatory and competitive environment of the industries in which we

operate;

? natural disasters, public health crises (including COVID-19), political crises,

and other catastrophic events or other events outside of our control;

? threatened terrorist attacks, political and economic unrest in international

markets and ongoing military action around the world; and

? fluctuations in foreign currency exchange rates.

For additional risk factors, please see Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 10-K"). These forward-looking statements and such risks, uncertainties and other

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factors speak only as of the date of this Quarterly Report on Form 10-Q, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto and the 2021 10-K.

The information herein relates to Qurate Retail, Inc. and its controlled subsidiaries (collectively "Qurate Retail," the "Company," "Consolidated Qurate Retail," "us," "we" or "our" unless the context otherwise requires).

Overview

We own controlling interests in video and online commerce companies. Our largest businesses and reportable segments are our operating segment comprised of QVC U.S. and HSN ("QxH") and QVC International. QVC markets and sells a wide variety of consumer products in the United States ("U.S.") and several foreign countries, primarily by means of its televised shopping programs and the Internet through its domestic and international websites and mobile applications. Zulily, LLC ("Zulily"), an online retailer offering customers a fun and entertaining shopping experience with a fresh selection of new product styles launched every day, is a reportable segment.

Our "Corporate and other" category includes our consolidated subsidiary Cornerstone Brands, Inc. ("Cornerstone"), along with various cost and equity method investments.

In December 2019, COVID-19 was reported to have surfaced in Wuhan, China and has subsequently spread across the globe causing a global pandemic, impacting all countries where Qurate Retail operates. As a result of the spread of the virus, certain local governmental agencies have imposed travel restrictions, local quarantines or stay at home restrictions to contain the spread, which has caused a significant disruption to most sectors of the economy.

In response to these containment measures, QVC has implemented increased cleaning protocols, social distancing measures and temperature screenings for employees who enter into facilities in locations with high levels of community transmission. QVC transitioned most administrative employees to a hybrid work model and certain employees have moved to permanent work from home arrangements which has resulted in the reduction of office space. Due to ongoing staffing issues and labor shortages, QVC has increased wages and offered incentives, resulting in additional costs to the company. As a result of these resource constraints QVC has experienced some delays in shipping at certain fulfillment centers. The inability to control the spread of COVID-19, or the expansion or extension of containment measures, such as stay at home restrictions, could negatively impact QVC's results in the future.

The stay at home restrictions imposed in response to COVID-19 required many traditional brick and mortar retailers to temporarily close their stores, but allowed distance retailers, including QVC, to continue operating. As a result, from the end of the first quarter of 2020 and continuing through the first quarter of 2021, QVC observed an increase in new customers and an increase in demand for certain categories, such as home. Beginning in the second quarter of 2021 through the first quarter of 2022, QVC observed a decline in new customers and a decline in demand for its home product category, while also seeing an increase in demand for its apparel product category.

In addition, there are several potential adverse impacts of COVID-19 that could cause a material negative impact to the Company's financial results, including its capital and liquidity. These include governmental restrictions on QVC's ability to continue to operate under stay at home restrictions and produce content. These include reduced demand for products we sell; decreases in the disposable income of existing and potential new customers; the impacts of any recession and other uncertainties with respect to the continuity of government stimulus programs implemented in response to COVID-19; increased currency volatility resulting in adverse currency rate fluctuations; higher unemployment; labor shortages; and an adverse impact to our supply chain and shipping disruptions for both the products we import and purchase domestically and the products we sell, including essential products experiencing higher demand, due to factory closures, labor shortages and other resource constraints. While the future impact is currently uncertain, the inability to control the spread of COVID-19 could cause any one of these adverse impacts, or combination of adverse impacts, to have a material impact on our financial results.

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Beginning in the second quarter of 2021, QVC saw increased product shortages as a result of high market demand in some product categories such as home and electronics. QVC also experienced escalating shipping disruptions due to challenges in the global supply chain and labor market causing extended lead time on inventory orders. As a result, the delayed receipt of inventory ordered in prior periods impacted QVC's ability to have the right products at the right time and has contributed to higher inventory levels as of March 31, 2022. These factors also impacted QVC's ability to offer certain goods and ship orders timely to its customers. In addition, QVC has seen increasing inflationary pressures during the period including higher wages, freight, and merchandise costs. Russia's invasion of Ukraine, as well as the related international response, is exacerbating inflationary pressures. If these pressures persist, inflated costs may continue to outpace QVC's pricing power in the near term.

Early decisions by the Biden Administration confirm continuity of a bipartisan consensus in the U.S. government favoring increased confrontation of China in trade practices and economic matters, national security and human rights. The imposition of any new U.S. tariffs on Chinese imports or the taking of other actions against China in the future, and any responses by China, could impair the Company's ability to meet customer demand and could result in lost sales or an increase in the Company's cost of merchandise, which would have a material adverse impact on the Company's businesses and results of operations.

On December 18, 2021, QVC experienced a fire at its Rocky Mount, Inc. fulfillment center in North Carolina. Rocky Mount was QVC's second-largest fulfillment center, processing approximately 25% to 30% of volume for QVC U.S., and also served as QVC U.S.'s primary returns center for hard goods. The building was significantly damaged as a result of the fire and related smoke and will not reopen. QVC has made a decision not to rebuild the facility; however, it is still in the process of determining future plans for the property. QVC has taken steps to mitigate disruption to operations including diverting inbound orders, leveraging its existing fulfillment centers and supplementing these facilities with short-term leased space as needed. During the year ended December 31, 2021, QVC recorded $229 million of fire related costs for which recovery was deemed probable and received $100 million of insurance proceeds. During the three months ended March 31, 2022, QVC incurred an additional $2 million in fire related costs, net that will not be reimbursed by QVC's insurance policies and $14 million of other fire related costs for which recovery was deemed probable based on QVC's insurance policies. While there can be no assurance, based on the provisions of QVC's insurance policies and discussions with insurance carriers, QVC determined that recovery of certain fire related costs is probable, and recorded an insurance receivable. The insurance receivable balance was $143 million as of March 31, 2022, net of $100 million of insurance proceeds received in advance.

QVC is still in the process of assessing the extent of damage to property and recoverability of inventory and submitting relevant insurance claims. During the three months ended March 31, 2022, QVC recorded an $80 million write-down related to Rocky Mount inventory which was included in cost of goods sold. Due to the circumstances surrounding the write-down of the inventory, this write-down has been excluded from Adjusted OIBDA (as defined below). These write-downs are expected to be submitted as part of QVC's business interruption insurance claim; however, there can be no guarantee they will be recovered. QVC expects to continue to record additional costs and recoveries until the property damage and inventory recoverability assessment is completed and the insurance claim is fully settled. While QVC has taken steps to minimize the overall impact to the business, it experienced increased warehouse and logistics costs during the three months ended March 31, 2022 and anticipates these increased warehouse and logistics costs to continue during 2022.

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