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
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
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
the
? changes in the trade policy and trade relations with
? 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
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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
Overview
We own controlling interests in video and online commerce companies. Our largest
businesses and reportable segments are our operating segment comprised of QVC
Our "Corporate and other" category includes our consolidated subsidiary
In
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
Early decisions by the
On
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
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