Q4 2019 Earnings Call

February 26, 2020

[music].

Ladies and gentlemen, thank you for standing by.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Qurate Retail, Inc. 2019 Q4 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press star one on your telephone. As a reminder, this conference is being recorded 26 February. I would now like to turn the conference over to Courtnee Chun, Chief Portfolio Officer and Senior Vice President of Investor Relations. Please go ahead.

Welcome to the cure rate retail 2019, Q4 earnings call. During the presentation, all participants will be in listen only mode. Afterwards, we will conduct a question answer session at that time for questions. Please press star one on your telephone.

This conference is being recorded February 26.

I would now like turn the conference over to Court <unk>, Chief portfolio Officer, and senior Vice President of Investor Relations.

Yes.

Thank you before we began we'd like to remind everyone that this calling for a certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent form 10-K filed by our company.

Courtnee Chun: Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-K filed by our company, QRTEA, with the SEC. These forward-looking statements speak only as of the date of this call, and Qurate Retail expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Qurate Retail's expectations with regard thereto, or any change in events, conditions, or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA, adjusted OIBDA margin, and constant currency.

Yes.

These forward looking statements speak only as of the data this call injury retailers personally disclaims any obligation or undertaking disseminate the updates or revisions to any forward looking statement contained herein dressed like any change injury retails expectations.

Or any change in events conditions or circumstances on which any such statements.

On today's call will discuss certain non-GAAP financial measures, including adjusted.

Hi, good margin in constant currency information regarding the comparable GAAP metrics, along with required definitions and reconciliations including preliminary note to schedule one through three crowd in earnings press release issued today, which is available on our website today speaking on the call we have president and CEO, Mike George every children CFO Jeff.

Courtnee Chun: Information regarding the comparable GAAP metrics, along with the required definitions and reconciliations, including preliminary note and Schedules one through three, can be found in the earnings press release issued today, which is available on our website. Today, speaking on the call, we have President and CEO, Mike George, Qurate Retail Group CFO, Jeff Davis, and Executive Chairman, Greg Maffei. Please note, we published slides to accompany the earnings release. These slides are available on our website. Now I'll hand the call over to Jeff Davis.

Executive Chairman.

Please note we published tries to accompany the earnings release. These slides are available on our website now I'll hand, the call over to Jeff Stevens.

Thank you and good morning, everyone.

Jeffrey A. Davis: Thank you. Good morning, everyone. Beginning with QxH, full year 2019 net revenue declined 3% on 3% lower unit volume. ASP essentially flat. Adjusted OIBDA margin declined 50 basis points. As detailed on slide 7 of our presentation on our website, the margin pressure was primarily due to headwinds from cost of sales, which includes inventory management costs associated with the accelerated exit of our Ingenious Designs, and elevated freight and warehouse costs related to our network optimization initiatives and general freight rate increases. These cost of sales pressures were partially offset by improved product mix. Adjusted OIBDA also benefited from reduced TV commissions, partially offset by increased marketing. Q4 performance was largely a continuation of 2019 trends. Net revenue declined 3% on 3% lower volume and flat ASP.

Jeff Davis: Thank you. Good morning, everyone. Beginning with QxH, full year 2019 net revenue declined 3% on 3% lower unit volume. ASP essentially flat. Adjusted OIBDA margin declined 50 basis points. As detailed on slide 7 of our presentation on our website, the margin pressure was primarily due to headwinds from cost of sales, which includes inventory management costs associated with the accelerated exit of our Ingenious Designs, and elevated freight and warehouse costs related to our network optimization initiatives and general freight rate increases. These cost of sales pressures were partially offset by improved product mix. Adjusted OIBDA also benefited from reduced TV commissions, partially offset by increased marketing. Q4 performance was largely a continuation of 2019 trends. Net revenue declined 3% on 3% lower volume and flat ASP.

Beginning with Qxh.

Your 2019 net revenue declined 3% on 3% lower unit volume, it's p. essentially flat.

Supported our margin declined 50 basis points.

As detailed on slide seven of our presentation on our website. The margin pressure was primarily due to headwinds from cost of sales, which includes inventory management costs associated with the accelerated to exit.

Clark ingenious designs.

[noise] elevated freight and warehouse costs related to our network optimization initiatives and journal for rate increases.

These costs itself pressures were partially offset by improved product mix.

Adjusted EBITDA also benefited from reduced TV Commission, partially offset by increased marketing.

Fourth quarter performance was largely a continuation of 2019 twins.

Revenue declined 3% on 3% lower volumes in flight pay upstream.

Jeffrey A. Davis: Adjusted OIBDA margin declined 100 basis points, primarily due to the same cost of sales headwinds as in the full year. Adjusted OIBDA benefited from lower incentive compensation and reduced TV commissions, partially offset by increased marketing spend. In Q4, we incurred a $147 million non-cash impairment charge related to the fair value of HSN's trade name. We continue to make progress on our network optimization project. We have begun shipping product from our new Northeast fulfillment center. We realized $160 million of cumulative growth synergies and $120 million of cumulative synergies, net of one-time costs, through 31 December 2019. The shortfall for our 2019 guidance will be captured in future periods. We reinvested a portion of these synergies into customer acquisition and improved customer experience.

Jeff Davis: Adjusted OIBDA margin declined 100 basis points, primarily due to the same cost of sales headwinds as in the full year. Adjusted OIBDA benefited from lower incentive compensation and reduced TV commissions, partially offset by increased marketing spend. In Q4, we incurred a $147 million non-cash impairment charge related to the fair value of HSN's trade name. We continue to make progress on our network optimization project. We have begun shipping product from our new Northeast fulfillment center. We realized $160 million of cumulative growth synergies and $120 million of cumulative synergies, net of one-time costs, through 31 December 2019. The shortfall for our 2019 guidance will be captured in future periods. We reinvested a portion of these synergies into customer acquisition and improved customer experience.

Just the board that I'm margin declined 100 basis points, primarily due to the same cost of sales headwinds cousin before year.

Just to Orthodox benefited from lower incentive compensation and reduce TV conditions, partially offset by increased marketing spend.

In the fourth quarter, we incurred and paid $147 million non cash impairment charge related to the fair value HM.

Right.

We continue to make progress on our network optimization project and yet begun shipping product from or North East fulfillment Center.

We realized $160 million of cumulative gross synergies and $120 million cumulative synergies net of onetime costs through December 31st 2019.

For shortfall for 2019 guidance will be captured in future periods, we reinvested a portion of the synergies into customer acquisition and improved customer experience.

Looking for two years 2020 to 2022, we remain on track to achieve our long term synergy targets.

Jeffrey A. Davis: Looking forward to years 2020 through 2022, we remain on track to achieve our long-term synergy targets. In 2020, we expect QxH to face several margin headwinds through the majority of the year due to the following factors. 1, we have fully lapped the benefit of HSN's renegotiated carriage agreements. 2, we have continued to experience reduced pack factor and duplicate facility and labor costs through Q2 as we complete remaining Q, phase one milestones of our network optimization. 3, as we prepare to decommission the previously announced fulfillment centers, we will take additional inventory clearance actions to reduce associated transfer costs to other facilities. 4, we will continue to take a disciplined approach to invest in marketing. Five, incentive compensation was variable in 2019, and we expect it to be a headwind in 2020.

Jeff Davis: Looking forward to years 2020 through 2022, we remain on track to achieve our long-term synergy targets. In 2020, we expect QxH to face several margin headwinds through the majority of the year due to the following factors. 1, we have fully lapped the benefit of HSN's renegotiated carriage agreements. 2, we have continued to experience reduced pack factor and duplicate facility and labor costs through Q2 as we complete remaining Q, phase one milestones of our network optimization. 3, as we prepare to decommission the previously announced fulfillment centers, we will take additional inventory clearance actions to reduce associated transfer costs to other facilities. 4, we will continue to take a disciplined approach to invest in marketing. Five, incentive compensation was variable in 2019, and we expect it to be a headwind in 2020.

2020, we expect Q ex age the faced several margin headwinds due the majority of the year.

Due to the following soccer's <unk>.

One.

Fully lapped the benefit of Hs sends renegotiated carriage agreements.

Two we have continued to experience reduce pack soccer and duplicative facility and labor costs through Q2, as we complete remaining Q phase one.

Milestones of our network optimization.

Three because he prepare to decommission the previously announced fulfillment centers, we will take additional inventory clearance actions to reduce associated transport costs do other facilities.

Before we will continue to take a disciplined approach to invest in marketing.

And five incentive compensation was heard bowl and 20 my team and we expect that to be a headwind in 2020.

To partially counterbalanced these pressures you're taking a number of action cost actions.

Jeffrey A. Davis: To partially counterbalance these pressures, we are taking a number of actions, cost actions, while continuing to realize the integration synergies and expect to increase product margins through strategic sourcing initiatives. Turning now to QVC International. In constant currency, full year and Q4 net revenue grew 1% on 5% higher ASP, partially offset by 3% lower volume and reduced shipping and handling revenue. For the Q4 and full year, Adjusted OIBDA margin improved 40 basis points and 80 basis points, respectively. For both periods, these gains were primarily from the closure of operations in France, partially offset by lower product margins and higher fixed costs, which included expenses associated with the new international structure that Mike will describe shortly. At zulily, revenue declined 18% in Q4 and 14% for the full year due to the factors that Mike will discuss shortly also.

Jeff Davis: To partially counterbalance these pressures, we are taking a number of actions, cost actions, while continuing to realize the integration synergies and expect to increase product margins through strategic sourcing initiatives. Turning now to QVC International. In constant currency, full year and Q4 net revenue grew 1% on 5% higher ASP, partially offset by 3% lower volume and reduced shipping and handling revenue. For the Q4 and full year, Adjusted OIBDA margin improved 40 basis points and 80 basis points, respectively. For both periods, these gains were primarily from the closure of operations in France, partially offset by lower product margins and higher fixed costs, which included expenses associated with the new international structure that Mike will describe shortly. At zulily, revenue declined 18% in Q4 and 14% for the full year due to the factors that Mike will discuss shortly also.

While continuing to realize the integration synergies and expect to increase product margins through strategic sourcing initiatives.

Turning now to QVC international in constant currency full year and Q4 net revenue grew 1%.

5% higher ASP, partially offset by 3% lower volume and reduces shipping and handling revenue.

For the fourth quarter and full year, adjusted OIBDA margin improved 40 basis basis points, because 80 basis points respectively.

For both periods. These gains were primarily from the closure of operations in France, partially offset by lower product margins going higher fixed costs, which included expenses associated with that new international structure that Mike will describe shortly.

Got you really revenue declined 18% in Q4 and 14% for the full year due to the factors that Mike will discuss shortly also.

Full year operating loss he wrote a substantially primarily due to a 1 billion dollar noncash impairment charge you literally incurred in Q3.

Jeffrey A. Davis: Full year operating loss eroded substantially, primarily due to the $1 billion non-cash impairment charge zulily incurred in Q3. For Q4 and full year, Adjusted OIBDA margin declined 270 and 280 basis points, respectively. The margin erosion primarily reflects a deleverage of supply chain and fixed costs from a double-digit revenue decline, partially offset by lower marketing spend as the management team remained diligent to a total rate return. At Cornerstone, excluding the improvements business that closed in Q4 of 2018, revenue grew 1% in Q4 and was relatively flat in the Q4, sorry, for the full year. Adjusted OIBDA grew $6 million in Q4 and $3 million in the year.

Jeff Davis: Full year operating loss eroded substantially, primarily due to the $1 billion non-cash impairment charge zulily incurred in Q3. For Q4 and full year, Adjusted OIBDA margin declined 270 and 280 basis points, respectively. The margin erosion primarily reflects a deleverage of supply chain and fixed costs from a double-digit revenue decline, partially offset by lower marketing spend as the management team remained diligent to a total rate return. At Cornerstone, excluding the improvements business that closed in Q4 of 2018, revenue grew 1% in Q4 and was relatively flat in the Q4, sorry, for the full year. Adjusted OIBDA grew $6 million in Q4 and $3 million in the year.

For the fourth quarter and full year adjusted mortgage on margin declined 270, 280 basis points, respectively. The margin erosion, primarily reflects a de leverage of supply chain and fixed cost from a double digit revenue decline.

Partially offset by lower marketing spend because of management team remain diligent to its hurdle rate return.

The cornerstone excluding the improvements business to close in Q4 2018 revenue grew 1% in Q4, it was relatively flat in the fourth quarter, sorry for the full year two slots for the full year and adjusted OIBDA grew $6 million in Q4, and 3 million dollar.

In the year.

The business gained momentum in the second half of the year led by gross margin initiatives and its home brands lower marketing expenses.

Jeffrey A. Davis: The business gained momentum in the second half of the year, led by gross margin initiatives in its home brands, lower marketing expenses, and execution of operating model enhancements to reduce certain fixed operating expenses. Looking at the business more broadly, we have not experienced a material impact from tariffs to date. We are pleased that a phase one agreement was reached between the US and China, and we'll continue to monitor developments. Moving now to capital expenditures, cash flow, and capital structure. Capital expenditures were $76 million in Q4 and $325 million for the full year on a cash basis, which is 2.4% of net revenues. The increase from 2018 was primarily due to the US fulfillment network optimization and continued investment in IT and commerce platforms.

Jeff Davis: The business gained momentum in the second half of the year, led by gross margin initiatives in its home brands, lower marketing expenses, and execution of operating model enhancements to reduce certain fixed operating expenses. Looking at the business more broadly, we have not experienced a material impact from tariffs to date. We are pleased that a phase one agreement was reached between the US and China, and we'll continue to monitor developments. Moving now to capital expenditures, cash flow, and capital structure. Capital expenditures were $76 million in Q4 and $325 million for the full year on a cash basis, which is 2.4% of net revenues. The increase from 2018 was primarily due to the US fulfillment network optimization and continued investment in IT and commerce platforms.

And execution of operating model enhancements to reduce certain fixed operating expenses.

Looking at the business more broadly.

Not experienced a material impact some tariffs to date.

We've got a phase one agreement was reached between the U.S. and China, and we'll continue to monitor tour developments.

Moving now to capital expenditures to cash flow and capital structure.

Capital expenditures were $76 million in Q4, and $325 million for the full year on a cash basis, which is 2.4% of net revenues.

The increase from 2018 was primarily due to the U.S. fulfilled.

In addition, and continued investment in high T E commerce platforms.

Total capital expenditures for the full year were below our guidance, primarily due to the classification of certain leasehold improvements as other assets.

Jeffrey A. Davis: Total capital expenditures for the full year were below our guidance, primarily due to the classification of certain leasehold improvements as other assets. For 2020, we anticipate gross CapEx to range from $300 to $320 million on a cash basis. Over time, we expect CapEx to return to normalized rates of 2 to 2.2% of net revenues. We grew free cash flow on an operating basis at Qurate Retail in 2019, with an increased focus on working capital management, lower transaction-related costs and cash taxes, and were able to offset reduced Adjusted OIBDA and higher capital expenditures.

Jeff Davis: Total capital expenditures for the full year were below our guidance, primarily due to the classification of certain leasehold improvements as other assets. For 2020, we anticipate gross CapEx to range from $300 to $320 million on a cash basis. Over time, we expect CapEx to return to normalized rates of 2 to 2.2% of net revenues. We grew free cash flow on an operating basis at Qurate Retail in 2019, with an increased focus on working capital management, lower transaction-related costs and cash taxes, and were able to offset reduced Adjusted OIBDA and higher capital expenditures.

For 2020, we anticipate gross capex to range from $300 million to $320 million on a cash basis.

Overtime, we expect Capex to return to a more normalized rates.

To the 2.2 times.

You need.

Normalized rate of 2% to 2.2% of net revenues.

We grew free cash flow and an operating basis I'm sure at retail in 2019.

With an increased focus on working capital management.

Lower transaction related costs, and cash taxes and were able to offset reduced adjusted OIBDA and higher capital expenditures in 2020, we expect to further improve free cash flow conversion reduce overall capital expenditures and additional working capital actions such as more closely aligned.

Jeffrey A. Davis: In 2020, we expect to further improve free cash flow conversion through reduced overall capital expenditures and additional working capital actions, such as more closely aligning our vendor payment terms with our new Easy Pay, FlexPay every day program announced in January. We were an early adopter in this space years ago and have a long track record in managing our program, with a customer default rates below 1.5% of net revenue. Qurate Retail estimates that its average annual effective tax rate over the next three years will be in the range of 15% to 18%, including federal, state, and foreign taxes, net of tax credits generated by Qurate Retail's green energy investments.

Jeff Davis: In 2020, we expect to further improve free cash flow conversion through reduced overall capital expenditures and additional working capital actions, such as more closely aligning our vendor payment terms with our new Easy Pay, FlexPay every day program announced in January. We were an early adopter in this space years ago and have a long track record in managing our program, with a customer default rates below 1.5% of net revenue. Qurate Retail estimates that its average annual effective tax rate over the next three years will be in the range of 15% to 18%, including federal, state, and foreign taxes, net of tax credits generated by Qurate Retail's green energy investments.

You know vendor payment terms with our new easy pay Flexpay everyday program announced in January.

Work early adopter into space years ago, and have a long track words, good and.

Manage our program.

When a customer tried default rates below one and half percent of net revenue.

Great retail estimate that its average annual effective tax rate over the next three years, we'll be in the range of 15% to 18%, including federal state and foreign taxes.

Net of tax credits generated by Curie retails Green energy investments.

Our effective tax rate and 2020, and 2021 will be lower than this range and we will increase significantly thereafter.

Jeffrey A. Davis: Our effective tax rate in 2020 and 2021 will be lower than this range and will increase significantly thereafter due to the expiration of certain green energy tax credits at the end of 2021. We are actively exploring new green energy investments that will generate tax credits post-2021, but have not yet closed on these investments at this time. In addition, Qurate Retail's book tax rate in 2019 was impacted by various one-time items outlined in our earnings press release. In Q4, we issued a total of $500 million of senior secured notes in the retail bond market at a coupon of 6.25% for a duration of 49 years.

Jeff Davis: Our effective tax rate in 2020 and 2021 will be lower than this range and will increase significantly thereafter due to the expiration of certain green energy tax credits at the end of 2021. We are actively exploring new green energy investments that will generate tax credits post-2021, but have not yet closed on these investments at this time. In addition, Qurate Retail's book tax rate in 2019 was impacted by various one-time items outlined in our earnings press release. In Q4, we issued a total of $500 million of senior secured notes in the retail bond market at a coupon of 6.25% for a duration of 49 years.

To the expiration of certain Green energy tax credits and 2021.

We are actively exploring new green energy investments that will generate tax code tax credits post 2021.

I have not yet close on these investments at this time.

In addition, during the tells book tax rate and 29 team was impacted by various one time items outlined in our earnings press release.

In Q4, we issued a total of $500 million of senior secured notes in the retail bond market had a coupon hubs fixed in the quarter percent for duration of 49 years.

At December 30, Onest 2019, QVC consolidated leverage as defined in our revolving credit agreement was 2.4 times as compared to what permissible 3.5 times.

Jeffrey A. Davis: At 31 December 2019, QVC's consolidated leverage, as defined in our revolving credit agreement, was 2.4 times as compared to a permissible 3.5 times. More recently, in February 2020, we issued another $575 million of senior secured notes in the institutional bond market at a coupon of 4.75% for a duration of 7 years. Upon closing the February 2020 issuance, we reduced the total capacity of our senior secured revolving credit facility by $700 million, which now provides for a $2.95 billion of total capacity. When our 10-K is filed later today, you will notice a material weakness in our internal controls.

Jeff Davis: At 31 December 2019, QVC's consolidated leverage, as defined in our revolving credit agreement, was 2.4 times as compared to a permissible 3.5 times. More recently, in February 2020, we issued another $575 million of senior secured notes in the institutional bond market at a coupon of 4.75% for a duration of 7 years. Upon closing the February 2020 issuance, we reduced the total capacity of our senior secured revolving credit facility by $700 million, which now provides for a $2.95 billion of total capacity. When our 10-K is filed later today, you will notice a material weakness in our internal controls.

More recently in February 2020, we issued another $575 million of senior secured notes and the institutional bond market had a coupon for in three quarters per cent for duration cop seven years fun closing the February 2020 issuance, we reduced the total capacity.

Our senior secured revolving credit facility like $700 million, which now provides for $2.95 billion of total capacity.

When our 10-K is filed later today, you will notice any material weakness in our internal controls.

We've made significant progress on this one.

Jeffrey A. Davis: We've made significant progress on this front, fully remediating one material weakness in the UK and improving our overall IT access controls globally, with the exception of certain access controls in Germany. We are committed to fully remediating these issues in the very near term. Now I'll turn the call over to Greg.

Jeff Davis: We've made significant progress on this front, fully remediating one material weakness in the UK and improving our overall IT access controls globally, with the exception of certain access controls in Germany. We are committed to fully remediating these issues in the very near term. Now I'll turn the call over to Greg.

Well, we remediating one material weakness in the UK.

And improving our overall I T access controls globally with the exception of certain access controls in Germany.

We are committed to fully remediating these issues and the very near term.

Now I'll turn the call over to Greg.

It is my guess.

Gregory B. Maffei: Is, is Mike good? Mike's on? Mike, you ready?

Greg Maffei: Is, is Mike good? Mike's on? Mike, you ready?

Like so I'm quite you're right it sounds like called.

Mike George: This is Mike. yeah, I'll, I'll take it.

I'll take it.

Gregory B. Maffei: Thanks, Greg.

Greg Maffei: Thanks, Greg.

Thank you Jeff.

Mike George: Thank you, Jeff. Thanks, Jeff, and good morning, everyone. 2019 was obviously a challenging year for us, for QxH and zulily, as those that disappointing results continued into Q4. However, despite the revenue and OIBDA decline and the accelerated capital investment, we grew free cash flow at Qurate Retail Group for the year, and importantly, we advanced a number of the strategic priorities we outlined at our November Investor Day. While we still have much work in front of us, we're confident the actions we're taking will enable us to capitalize on changing industry dynamics to lead at the intersection of retail, media, and social, offering a third way to shop that is highly differentiated from both brick-and-mortar and transactional e-commerce. Before reviewing our business segments, let me briefly comment on the coronavirus outbreak.

Thanks, Jeff and good morning, everyone.

One of my team was actually a challenging year for us for Qxh trend.

Zulily.

Those are.

Disappointing results continued into Q4.

However, despite the revenue and over to decline then Nick accelerated capital investment we grew free cash flow a cure a retail group for the year.

And importantly, we've asked a number of the strategic priorities [noise].

Outlined at our November Investor Day.

Well, we still have much work in front of US we're confident the actions, we're taking will enable us to capitalize on changing industry dynamics to lead at the intersection of retail media and social offering a third way to shop that is highly differentiated from both brick and mortar and transactional E commerce.

Before reviewing our business segments.

Briefly comment on the Corona virus outbreak.

Our first priority has been to take appropriate measures to ensure the health and safety of our team members and partners in the region.

Mike George: Our first priority has been to take appropriate measures to ensure the health and safety of our team members and partners in the region. Our sourcing and quality assurance teams are now gradually returning to work, and factories are beginning to restart production. While the situation remains fluid, we do anticipate ongoing supply chain disruptions and are actively developing contingency plans to mitigate the impact of any shortfalls in product supply. Across the company, zulily has been the most affected to date, since it carries minimal inventory and has a large China direct ship business. As a result, we've had to remove a number of daily events and product lines from our zulily offerings, causing a meaningful sales impact. It's too early to assess potential sales challenges at our other businesses, but we will continue to take actions as developments unfold. Turning now to our QxH business.

Our sourcing and quality assurance teams are now gradually returning to work.

Factories are beginning to restart production.

Well the situation remains fluid, we do anticipate ongoing supply chain disruptions and are actively developing contingency plans to mitigate the impact of any shortfalls and product supply.

Across the company.

He has been the most effective today since it carries minimal inventory has a large trying to direct ship business.

As a result, we've had to remove a number of daily events and product lines from our slowly offerings.

I was in a meaningful sales impact.

It's too early to assess potential sales challenges at our other businesses, but we will continue to take actions as developments on fold.

Turning now to our Qxh business our performance challenges in Q4 were largely consistent with the issues. We described on our last call.

Mike George: Our performance challenges in Q4 were largely consistent with the issues we described on our last call. Looking at our category performance, home revenue declined $40 million in Q4 and $128 million in the full year. The largest pressure in home came from the closure of HSN's Ingenious Designs subsidiary, which we've now fully lapped. We also saw continued pressure in the premium mattress segment as that business shifts to lower price alternatives. This erosion was partially offset by gains in gourmet food, in floor care, including leading brands, iRobot, Dyson, and Shark, and in personal care with Philips Sonicare and Waterpik. In fashion, which includes apparel, accessories, and footwear, revenue declined $17 million in Q4 and $49 million in the full year. This performance primarily reflects a tough industry cycle, with all three categories down for the year, according to market data firm NPD.

Looking at our category performance home revenue declined 40 million in Q4, and 128 million in the full year.

The largest pressure going home came from the closure HSN ingenious designs subsidiary.

We've now fully lap.

We also saw continued pressure in the Premier Master segment as that business, just a lower price alternatives.

This erosion was partially offset by gains in gourmet food and floor care, including leading brands I robot Tyson and shark and a personal care with Philips Sonicare and water pick.

In fashion, which includes apparel accessories footwear revenue declined 70 million in Q4, and 49 million in the full year.

This performance primarily reflects a tough industry cycle with all three categories down for the year. According to market data from NPP.

We're generally holding our share, but not offsetting industry softness.

Mike George: We're generally holding our share, but not offsetting industry softness. Earlier in the year, recognizing the weaker industry trends, we reduced our inventory purchases for the second half of the year and cut back Q4 apparel airtime. Beauty revenue declined $23 million in Q4 and $27 million in the full year. We're seeing weakness in a few of our largest brands as we face a highly competitive marketplace with expanding distribution and slowing industry growth. We continue to focus on diversifying assortments, with good growth in emerging brands like Beekman 1802, Lancer, and Belle Beauty. Consumer electronics revenue declined $6 million in Q4, but increased $12 million in the full year. While we saw strength in wearables, including Fitbit and audio with brands such as Bose, we continued to see erosion in laptops, tablets, and TVs, which also puts pressure on ASPs.

Earlier in the year, recognizing the weaker industry trends, we reduced our inventory purchases for the second half of the year end cutback Q4 apparel archive.

Beauty revenue declined 23 million in Q4, and 27 million in the full year.

We're seeing weakness in a few of our largest brands as we face a highly competitive marketplace with expanding distribution and slowing industry growth.

Continue to focus on diversifying assortments with good with good growth in emerging brands like big but its you know two plants are and belt beauty.

Consumer electronics revenue declined 6 million in Q4, but increased 12 nine in the full year.

While we saw strength in wearables, including Fitbit and audio with brands such as Bose.

You need to see erosion in laptops tablets, and Tvs, which also puts pressure on ASP.

In jewelry revenues declined 11 million in Q4, and 71 million in the full year, driven primarily by reduced Eric <unk>, which was partially offset by improved productivity.

Mike George: In jewelry, revenue declined $11 million in Q4 and $71 million in the full year, driven primarily by reduced airtime, which is partially offset by improved productivity. Our focus on increasing sales per minute by concentrating our airtime on a handful of highly engaging jewelry events that drive tune in, enabled us to substantially reduce the rate of decline in the category. Now, turning to the customer view. Overall, the decline in customers in the last 12 months is consistent with the revenue decline. For existing customers, count declined 3% in Q4 and 2% for the full year. For new customers, count declined 2% in Q4 and was down slightly in the full year. The Q4 decline is a reversal from recent growth trends, primarily due to a difficult comparison in Q4 of 2018, when we grew new customers 10% at QVC.

Our focus on increasing sales per minute by concentrating our airtime on a handful of highly engaging jewelry events that drive tune in enabled us to substantially reduce the rate of decline in the category.

Now turning to the customer view overall the decline in customers in the last 12 months is consistent with the revenue decline.

For existing customers count declined 3% in Q4, and 2% for the full year for new customers Count declined 2% in Q4 and was down slightly in the full year.

The Q4 decline is a reversal from recent growth trends, primarily due to difficult comparison in Q4 18, when we grew new customers, 10% at QVC.

For reactivated customers counts declined 2% in Q4 at 4% in 2019, driven largely by the softness in apparel, which is a key categories for this cohort.

Mike George: For reactivated customers, count declined 2% in Q4 and 4% in 2019, driven largely by the softness in apparel, which is a key category for this cohort. As we outlined at Investor Day, our overall performance in 2019 was impacted, we believe, by three key factors. First, and most importantly, we're operating in a rapidly changing industry context, with long-term headwinds from declining linear TV viewership and growing brand proliferation, which leads to shorter and more volatile product life cycles. In fact, 10 of our larger brands, which represented just 12% of 2019 demand sales, accounted for more than 100% of our 2019 sales decline.

As we outlined at Investor day.

Our overall performance in 2019 was impacted we believed by three key factors.

First and most importantly, we're operating in a rapidly changing industry contacts with long term headwinds from declining linear TV viewership and growing brand proliferation.

At least a shorter and more volatile product lifecycles.

In fact kind of our larger brands, which represented just 12% of 29 team demand sales accounted for more than 100% over 2019 sales decline.

Well, it's a natural part of our business that most brands hit a peak level and then begin to decline. We're finding that it is taking more to get new brands to scale fast enough to fully offset these large brand declines and momentarily I'll share more on a product curations strategies to respond to this challenge.

Mike George: While it's a natural part of our business that most brands hit a peak level and then begin to decline, we're finding that it is taking more to get new brands to scale fast enough to fully offset these large brand declines. Momentarily, I'll share more on our product curation strategies to respond to this challenge. While these industry pressures are real, this changing landscape also creates new opportunities for us as consumers access more and more types of media in more ways than ever before, and the growth of transactional e-commerce has led to a desire for alternatives that are more authentic, engaging, and experiential, which we believe taps into our core DNA. Second, exacerbating these long-term trends, we saw a cyclical slowdown in fashion and to a lesser extent, in beauty, which together have been our top growth drivers for several years.

And while these industry pressures are real this changing landscape also creates new opportunities for us as consumers access more and more types of media in more ways than ever before and the growth of transactional E. Commerce has led to a desire for alternatives that are more authentic engaging experiential which.

We believe taps into our core DNA.

Second exacerbating these long term trends, we saw a cyclical slow down in fashion and to a lesser extent in beauty, which together have been our top growth drivers for several years.

Mike George: Finally, we experienced some short-term pressures, a combination of organizational disruption associated with all the changes we've made, along with purposeful choices to close down the Ingenious Designs subsidiary due to its high cost structure and invest in restructuring our fulfillment network to improve service levels and lower costs over the midterm. Despite a disappointing year, we believe our platform is as relevant today as ever with its enormous global scale, the unparalleled consumer reach with low marketing spend, the focus on highly curated product discoveries offered at compelling values with flexible payment options, immersive video-rich experiences, and intense social engagement, all leading to astounding customer engagement and loyalty.

Finally, we experienced some short term pressures the combination of organizational disruption associated with all the changes we've made along with purposeful choices to close down ingenious designs subsidiary to tie cost structure and invest in restructuring our fulfillment network to improve service levels and lower cost over the midterm.

So despite a disappointing year, we believe our platform is as relevant today as ever.

It's enormous global scale.

In parallel consumer reach with low marketing spend the focus on highly curated product discoveries offered at compelling values with flexible payment options.

Immersive video rich experiences and intense social engagement, all leading to astounding customer engagement and loyalty.

The recent explosion of direct to consumer brands, coupled with the inevitable pressures those brands are now facing at the cost of sustaining customer reach is proving so high.

Mike George: The recent explosion of direct-to-consumer brands, coupled with the inevitable pressures those brands are now facing at the cost of sustaining customer reach is proving so high, both highlights customers' desire for something more in the shopping experience and also underscores the efficiency and attractiveness of our brand-building platform. As we shared at Investor Day, we're intently focused on accelerating five strategies that will enable us to take advantage of what this platform has to offer. First, curate special products at compelling values. Second, extend video reach and relevance. Third, reimagine daily digital discovery, making our websites and apps every bit as engaging and sticky as our traditional live TV experience. Fourth, expand and engage our passionate community, reaching new customers, and increasing engagement of our existing users through loyalty, personalization, and expanded performance marketing.

Both highlights customers desire for something more in the shopping experience.

Also underscores the efficiency and attractiveness of our brand building platform.

As we showed at Investor day, we're intently focused on accelerating five strategies that will enable us to take advantage of what this platform has to offer.

First cure rate special products at compelling values second extended video reach and relevance.

Third Reimagine daily digital discovery picking our websites and apps every bit of engaging and sticky as our traditional live TV experience fourth expand and engage our passionate community, reaching new customer customers and increasing engagement of our existing users through royalty.

Personalization and expanded performance marketing.

And finally deliberate choice for customer service by meeting, our customers' rising delivery expectations and injecting moments of joy throughout the service journey that deepens her emotional connection to the brand.

Mike George: Finally, deliver joyful customer service by meeting our customers' rising delivery expectations and injecting moments of joy throughout the service journey that deepens her emotional connection to the brand. This morning, I'd like to provide an update on the first two, curating great products and distributing our content everywhere the consumer accesses video. Our business starts with special products at amazing values. Our product curation strategy is at the center of everything we do. To win in today's environment, we need to increase product differentiation, drive a greater pace of product innovation, both ourselves and with our vendor partners, increase our pace of expansion into adjacent and underserved categories, expand our capacity for product discovery, and devote more resources to nurturing brands through their life cycles.

This morning, I'd like to provide an update on the first two curator and great products and distributing our content everywhere. The consumer access is video.

Our business starts with special products and amazing values. So our product duration strategy is at the center of everything we do.

To win in today's environment, we need to increased product differentiation.

Drive a greater patient product innovation.

Both ourselves and with our vendor partners.

Increased our pace of expansion into adjacent and underserved categories expand our capacity for product discovery and devote more resources to nurturing brands through their lifecycles.

Wrapping proprietary and exclusive offerings, creating differentiation and driving innovation by expanding our design development and discovery capabilities across categories.

Mike George: We're ramping up proprietary and exclusive offerings, creating differentiation and driving innovation by expanding our design, development, and discovery capabilities across categories. The 2019 successes included the launch of Northern Nights and South Street Loft Bed-in-a-Box programs at home, Potion 54 by Jill Martin in beauty, and G by Giuliana in apparel, among many others. 2020 will bring the launch of at least 10 major new brands developed through our in-house design and development capability, including the relaunch of Iman at HSN next week. We're tackling under-penetrated categories like athleisure and outerwear, and ones where we feel we've under-leveraged our strengths, like size inclusivity. In 2019, we introduced key national athleisure brands, as well as proprietary offerings, including New Balance by Isaac Mizrahi, Merrell, Lug, and our proprietary zuda brand, with 3 more proprietary launches coming in 2020.

2019th successes included the included the lots of Northern nights and South Street loft that in a box programs at home.

Pushing 54 by Geo Martin and beauty and G by Julianna in apparel, among many others and 2020 will put into lots of at least 10 major new Brad's developed through our in house design and development capability, including the relaunch of them on at HSN next week.

We're tackling underpenetrated categories, like athleisure, and outerwear and one is where we feel with under leverage our strengths like sized inclusivity.

In 2019, we introduced T. national Athleisure brands, as well as proprietary offerings, including new balance by Isaac Mizrahi, Merrell Lucky and our proprietary zoo to Brad with three more proprietary launches coming in 2020.

In outerwear, we saw great success, with new age artisan expedition, and Lori Montreal, and or further expanding our offerings and 20 twond.

Mike George: In outerwear, we saw great success with Nuage, Arctic Expedition, and Laurier & Co. Montreal. We're further expanding our offerings in 2020. QVC and HSN have been leaders in size inclusivity for decades, offering virtually all fashion products in the full size range at one uniform price. Now we're further expanding the range, adding sizes 4X and 5X in many brands and in underserved categories like outerwear and activewear. In 2020, for the first time, we'll be launching brands that are designed and developed from the outset with a larger size perspective, in partnership with two highly regarded body-positive influencers. We're also taking steps to enhance our organizational focus on discovery and innovation. Recall in 2018 that we combined the QVC and HSN merchandising organizations to take a more holistic category view.

And can be seen it just didn't have been leaders in size inclusivity for decades offer in virtually all fashion products in the full size range have one uniform price.

Now, we're further expanding the range, adding sizes Forex and fivex in many brands and an underserved categories like outerwear and activewear.

2020 for the first time, we'll be launching brands that are designed and developed from the outset, that's a larger size perspective.

Our to ship with two highly regarded body positive influencers.

We're also taking steps to enhance our organizational focus on discovery and innovation.

All in 2018 of the combined with QVC and HSN merchandise organizations to take a more holistic category for you.

Mike George: In 2020, we're investing in more specialized capabilities to enable our buyers to spend more time in the market curating special finds and less time on administrative functions. Last summer, we conducted the Big Find, a nationwide search for the next big brands in beauty, fashion, and jewelry, with two successful launches from the search in Q4 and an additional 38 in Q1 alone, with more to follow. To win with special products, we also have to ensure that every item, inclusive of shipping and handling charges, is offered at a compelling value relative to the market. In January, we took another big step forward in our value story by offering Easy Pay at QVC US and FlexPay at HSN on substantially every item we sell.

2020, we're investing in more specialized capabilities to enable our buyers to spend more time in the market trading special fines and last time on administrative functions.

Last summer, we conducted the big five and nationwide search for the next big brands and beauty fashion jewelry with two successful losses from the search in Q4 and an additional 38 in Q1 alone with more to follow.

Now to win with special products were also up to ensure that every item inclusive of shipping and handling charges is offered at a compelling value relative to the market in January we took another big step forward in our value story by offering easy pay at QVC, U.S. and flex pay at HSN substantially every item we sell.

This has been a popular this has become a popular payment option, especially among younger consumers.

Mike George: This has become a popular payment option, especially among younger consumers, as other retailers now provide similar programs. Typically at a much higher operating cost. We believe these product initiatives will prove instrumental in our return to growth. We also acknowledge it will take some time for these programs to scale sufficiently to offset the erosion in some of our larger brands. Of course, none of our product curation investments matter if we can't get these discoveries in front of the consumer, which leads me to our second priority, extending our video reach and relevance across platforms. While we face short-term pressures as cord-cutting accelerates, we firmly believe we're entering a new era supported by multiple investments and innovations that will fundamentally reshape and enhance our unique video shopping platform and expand our potential customer base.

Other retailers now provide similar programs that typically at a much higher operating costs.

We believe these product initiatives will prove instrumental in our return to growth, but we also acknowledge it will take some time for these programs to scale sufficiently to offset the erosion and some of our larger brands.

Of course, none of our product duration investments matter, if we can't get these discoveries in front of the consumer which leads me to our second priority extending our video reach and relevance across platforms.

While we face short term pressures as cord cutting accelerates.

We firmly believe we're entering a new era supported by multiple investments in innovations that will fundamentally reshape and enhance our unique video shopping platform and expand our potential customer base.

The future of video shopping is increasingly about ubiquitous distribution, new methods of discoverability more tailored and relevant lifestyle content and enter activity that puts the viewer and control of the experience. It's let's go through each of these four components.

Mike George: The future of video shopping is increasingly about ubiquitous distribution, new methods of discoverability, more tailored and relevant lifestyle content, and interactivity that puts the viewer in control of the experience. Let's go through each of these four components. First, ubiquitous distribution. Simply stated, we need to be wherever the consumer accesses video content. While our MVPD homes have declined from a peak of 99 million in 2015 to 80 million today, the vast majority of consumers in our target demographic still have a paid TV service. Our multi-year investments in five networks with attractive channel locations still provides a unique advantage over every other retailer. As early as 2012, we began introducing over-the-air distribution, which has grown rapidly as an alternative to pay TV. Today, we're in approximately 11 million OTA homes.

First ubiquitous distribution.

Simply stated we need to be were ever the consumer accesses video content.

While our MPPD homes that decline from a peak of 99 million in 2015 that 80 million per day.

The vast majority of consumers in our target demographic still have a pay TV service.

Our multiyear investment Ffive networks with attractive channel locations still provides unique advantage or every other retailer.

And as early as 2012, we began introducing over the air distribution, which has grown rapidly as an alternative to pay TV.

They were approximately 11 million OTI eight homes.

The growth of virtual NBP alternatives also noticed digital skinny bundles provides another distribution opportunity.

Mike George: The growth of virtual MVPD alternatives, also known as digital skinny bundles, provides another distribution opportunity. In Q4, we launched on AT&T TV Now, and we anticipate additional adding additional major distributors this year. We're leading innovation in over-the-top offerings with multiple partners. We've teamed up with the major streaming service device providers, including Roku, Amazon Fire TV, and Apple TV. Last year, we launched a greatly enhanced streaming app on Roku and Amazon that combines the best QVC and HSN content. With Roku, we saw a 58% growth in our net app installs over the prior year to 2.9 million by year-end, and we rank among their top 25 free TV and movie apps out of an overall universe of 16,000 channels.

Q4, we launched on 18, Ptv now and we anticipate additional.

Adding additional major distributors this year.

We're leading innovation over the top offerings with multiple partners.

We've teamed up with a major streaming service device providers, including Roku, Amazon fire, TV and Apple TV.

Last year, we launched a greatly enhanced stream in App on road crew and Amazon the combines the best QVC and HSN content.

With broker, who we saw 58% growth in our net app installs over the prior year to 2.9 million by year end and we rank among their top 25 free TV a movie apps out of an overall universe of 16000 channels.

Mike George: We're partnering with TV manufacturers to offer our linear streams directly, including recently launching QVC and HSN networks on Samsung TV Plus, Xumo, and LG Channel Plus. We're working with our cable distributors to access homes that only subscribe to their broadband offering, such as through Comcast's Flex streaming service, an alternative to their Xfinity platform for homes without a video subscription. We continue to focus on digital video aggregators like YouTube, Instagram, and Facebook. Of course, we're also focused on our own digital platforms and have seen significant growth in viewing minutes of our linear feeds on both our web and app platforms. We're in the early stages of exploring relationships with other programmers and audience aggregators to leverage their access. For example, in September, we launched our most popular program, In the Kitchen with David, on CBS's new lifestyle OTA and streaming network, Dabl.

We're partnering with TV manufacturers to offer our linear streams directly including recently launching QVC and HSN networks on Samsung TP, Pos Zummo and LG channel plus.

We're working with our cable distributors to access homes that only subscribe to their broadband offerings, such as to Comcast flux streaming service and alternative therapy is gonna be platform for homes without a video subscription.

We continue to focus on digital video Aggregators like you to Instagram and Facebook.

And of course, we're also focused on our own digital platforms and have seen significant growth in viewing minutes of our linear feet on both our web and app platforms.

During the early stages of exploring relationships with other programmers and audience aggregators to leverage their access.

For example in September we lost our most popular program in the kitchen with David on CBS is new lifestyle boutique and streaming network dabble.

We expect to be announcing new relationships later this year that will introduce us to other new audiences.

Mike George: We expect to be announcing new relationships later this year that will introduce us to other new audiences. The second component of the video shopping platform of the future is discoverability. Direct search interfaces, voice-activated remotes, and connected smart devices are all changing the way viewers find content, compounded by the growing fragmentation of devices and services. To address this shifting landscape, we're leaning into new ways to develop audiences, working with our partners to achieve prominent positioning through initial channel selection, featured carousels, addressable advertising, banners, screen savers, tune-in messages, and electronic program guide placements. Leveraging these types of techniques has led to some of our early wins with Roku. The third component is ensuring we're offering relevant, tailored content that fits the platform and the audience. We've significantly increased our investment in a variety of new shoppable and lifestyle content, as I've shared on recent calls.

The second component of the video shopping platform for the future is discoverability.

Direct search interfaces voice activated remotes and connected smart devices are all changing the way the worst find content.

Compounded by the growing fragmentation of devices and services.

To address this shifting landscape, we're leaning into new ways to develop audiences working with our partners to cheap prominent positioning through initial channel selection featured carousel addressable advertising banners, screensavers tuna and messages and electronic program Guy placements leveraging these types of techniques has led.

Some of our early wins with broker.

The third component is ensuring are offered relevant tailored content. The 50 platform and the audience. We've significantly increased our investment in a variety of new shoppable and lifestyle content as I've shared on recent calls.

Finally, we aim to be a leader and innovator as television platform has become increasingly interactive creating whole new possibilities for the video shopping experience.

Mike George: Finally, we aim to be a leader and an innovator as television platforms become increasingly interactive, creating whole new possibilities for the video shopping experience. We're already seeing the power of putting the user in control of the content as she is when watching our current streaming app on Roku or Amazon. Later this year, we anticipate taking the next step, bringing to market a holistic shopping and lifestyle streaming service with a pay TV partner that will create an even more immersive and convenient retail experience. We remain intently focused on our strategic plan to return to profitable growth at QxH and compete in this dynamic retail and media marketplace.

We're already seeing the power of putting the user and to call. The content as she is one watching our current screaming app on roku or Amazon.

Later this year, we anticipate taking the next step.

Bringing to market, a holistic shopping and lifestyle streaming service with a pay TV partner that will create it even more immersive and convenient retail experience.

We remain intently focused on our strategic plan to return to profitable growth at Qxh and compete in this dynamic retail and media marketplace. We're working on a number of initiatives, which makes the timing of a return to topline growth hard to predict.

Mike George: We're working on a number of initiatives, which makes the timing of a return to top-line growth hard to predict, but we also recognize several macro factors that we will need to navigate in 2020, including the coronavirus impact, the Olympics, and the US presidential election. Even with these expected sales pressures, we do anticipate that with the progress we're making on margins, costs, and synergies, in the later part of the year, we will start to see, as Jeff noted, a moderation in the orbity yield pressures that we began to experience in the second half of 2019. Coupled with our additional focus on working capital efficiency and improving capital management, we anticipate seeing improvements in our free cash flow conversion this year as well. Now, let's shift to QVC International.

Also recognized several macro factors that will we will need to navigate and 2020, including the Corona virus impact the Olympics in the U.S. presidential election.

However, even with these expected sales pressures, we do anticipate that with the progress we're making on margins cost synergies in the later part of the year, we will start to see as Jeff noted a moderation in OIBDA yield pressures that we began to experience in the second half of 19.

Coupled with our additional focus on working capital efficiency and prudent capital management, we anticipate seeing improvements at our free cash flow conversion this year as well.

Now, let's shift the QVC International we continue to be encouraged by our solid international performance led by QVC, Japan, where the team drove strong broad based execution across product and programming effectively mitigating the challenges of the consumption tax increase that went into effect October 1st.

Mike George: We continue to be encouraged by our solid international performance, led by QVC Japan, where the team drove strong, broad-based execution across product and programming, effectively mitigating the challenges of the consumption tax increase that went into effect 1 October. We look forward, QVC International will continue to focus on margin enhancement initiatives, including rebalancing the promotional activity and optimizing air time, product mix, inventory efficiency, and TSV margins. To support our strategies to drive long-term growth in international, we recently announced a new international structure with strategic investments in new cross-market teams to drive digital growth, enhance performance marketing and brand development, deepen advanced analytic resources, and drive region-wide merchandising strategies and vendor partnerships. Turning to Zulily, Zulily, their performance remained highly challenged due to continued headwinds in customer acquisition costs, along with lower purchase frequency from new and existing customers.

As we look forward QVC International will continue to focus on margin enhancement initiatives, including rebalancing the promotional activity in optimizing air time product mix inventory efficiency and TSV margins.

To support our strategies to drive long term growth in international we recently announced a new international structure with strategic investments in New cross market teams to drive digital growth enhanced performance marketing and brand development.

Keep in advanced analytic resources and drive Regionwide merchandising strategies and vendor partnerships.

Turning to the Leila slowly their performance remained highly challenged due to continued headwinds in customer acquisition costs, along with lower purchase frequency from new and existing customers.

It wasn't really faces challenges on several dimensions compounded in the short term buys the corona virus outbreak.

Mike George: Now while Zulily faces challenges on several dimensions, compounded in the short term by the coronavirus outbreak, we continue to see the longer-term opportunity. We believe Zulily serves a large addressable market of consumers who are willing to trade speed of delivery for meaningful product savings. To address the current challenges, we continue to add top talents in the organization, including, in just the last several months, hiring a new chief merchant, a chief marketing officer, a leader for performance marketing, a leader for new business development, and a leader for machine learning and data, all of whom bring strong backgrounds in innovating across retail, technology, and customer experience. We have remained disciplined on marketing returns and reduced marketing spend 11% year-over-year in Q4. We'll continue experimenting with new marketing channels to find more efficient acquisition vehicles.

We continue to see longer term opportunities. We believes that only serves a large addressable market of consumers who are willing to trade speed of delivery for meaningful product savings.

To address the current challenges, we continue to add top talent to the organization.

Included in just the last several months hiring new Chief merchant Chief Marketing Officer, a leader for performance marketing leader for New business development, and a leader for machine learning and data all of them pretty strong backgrounds, and innovating across retail technology and customer experience.

We have remained disciplined on marketing returns and reduced marketing spend 11% year over year in Q4 will continue experimenting with new marketing channels to find more efficient acquisition vehicles.

Our product the new chief merchant and business development leader or highly focused on acquiring new brands and products, both comedian national brands and unique fines.

Mike George: On products, the new chief merchant and business development leader are highly focused on acquiring new brands and products, both leading national brands and unique finds. These product and marketing initiatives are combined with actions to improve the customer experience. In October, Zulily launched its Best Price Promise as a foundation to increase transparency and earn customers' trust. We're also redeploying savings from our reduced marketing spend into new pilot shipping and returns programs, and we've improved site functionality in areas like product search, shop by category, and homepage videos. Finally, we'll also benefit from cost actions taken last summer, and we'll maintain a disciplined focus on cost management going forward. At Cornerstone, we've built momentum in the second half of the year, led by strength in the home brands. Ballard Designs generated record Q4 revenue, highlighting the success of its retail stores.

These product and marketing initiatives, our combined with actions to improve the customer experience.

In October so when we launched its best price promise as a foundation to increase transparency and earn customers Trust.

Also redeploying savings from our reduced marketing spend into new pilots shipping and returns programs.

We've improved site functionality in areas like product search shop by category and home page videos.

Finally will also benefit from cost actions taken last summer and we'll maintain disciplined focus on cost management going forward.

The cornerstone we've built momentum in the second half of your led by strength in the home brands Ballard design generated record Q4 revenue highlighting the success of its retail stores Grandin Road delivered record Q4, OIBDA driven by seasonal business.

Mike George: Grandin Road delivered record Q4 EBITDA, driven by its seasonal business. As we look forward, Cornerstone will be focused on sustaining momentum in home brands, particularly with Ballard's retail expansion, Frontgate's outdoor assortment, and Grandin Road's home furniture and accessories. In summary, while our 2019 and Q4 results were disappointing at QxH and zulily, we remain resolutely focused on our strategic plan. We are confident in our business model and our core strengths of curated discoveries, immersive video-rich experiences, and the ability to aggregate live audiences of highly engaged customers across multiple commerce platforms. With that, I will turn it over to Greg.

As we look for cornerstone will be focused on sustaining momentum in home brands, particularly with valor tail expansion front case outdoor assortment and Grandin road home furniture and accessories.

In summary, while our 2019 in Q4 results were disappointing at Qxh and so really we remain resolutely focused on our strategic plan. We are confident in our business model and our core strengths of traded discoveries of Mercer video rich experiences and the ability to aggregate live audiences of highly engaged customer.

There's across multiple commerce platforms.

And with that I will turn it over to Greg.

Thanks, Mike.

Gregory B. Maffei: Thanks, Mike. Our slightly flipped script. Let's review our capital allocation for 2019 across the areas we have previously mentioned. First, we are investing in the business for the future. We deployed $325 million in CapEx in 2019. It was a little bit elevated due to some IT and fulfillment center initiatives, which will start to pay back at the end of this year and further ramp in 2021. Part of those were obviously related to our HSN integration. We expect CapEx to be lower in 2020. Second, managing our tax exposure. We repurchased $98 million of MSI exchangeable bonds and hedged our remaining exposure through total return swaps. Lastly, return of capital to shareholders. We repurchased $392 million of QRTEA shares.

Greg Maffei: Thanks, Mike. Our slightly flipped script. Let's review our capital allocation for 2019 across the areas we have previously mentioned. First, we are investing in the business for the future. We deployed $325 million in CapEx in 2019. It was a little bit elevated due to some IT and fulfillment center initiatives, which will start to pay back at the end of this year and further ramp in 2021. Part of those were obviously related to our HSN integration. We expect CapEx to be lower in 2020. Second, managing our tax exposure. We repurchased $98 million of MSI exchangeable bonds and hedged our remaining exposure through total return swaps. Lastly, return of capital to shareholders. We repurchased $392 million of QRTEA shares.

Slightly clipped script.

Let's review our capital allocation for 2019 across the areas. We have previously mentioned first.

Investing in the business for the future.

We deployed Threerd 20, bottling and Capex in 2019.

With a little bit elevated due to some t. and fulfillment center initiatives, which will start the payback.

Ended this year and further ramp in 2021.

Are those were obviously, we'll look to our HSN integration.

We expect cash capex to be lower in 2020.

Second managing our tax exposure.

We repurchased $98 million monetize exchangeable bond UN hedged our remaining exposure through total return swaps.

Lastly return of capital shareholders.

We repurchased $392 million quirky yet a shares.

Given the volatility of stock.

Gregory B. Maffei: Given the volatility in the stock and the results, we remain cautious on the buyback. While the business is experiencing some headwinds now, we still note it generates strong free cash flow, and we will prudently and opportunistically allocate it. Please mark your calendars for our annual investor meeting in New York on Thursday, 19 November. We appreciate your continued interest in Qurate Retail. Operator, now I'd like to open the line for questions.

Greg Maffei: Given the volatility in the stock and the results, we remain cautious on the buyback. While the business is experiencing some headwinds now, we still note it generates strong free cash flow, and we will prudently and opportunistically allocate it. Please mark your calendars for our annual investor meeting in New York on Thursday, 19 November. We appreciate your continued interest in Qurate Retail. Operator, now I'd like to open the line for questions.

And the results we remain cautious on the buyback.

While the business is experiencing some headwinds now.

We still note it generates strong free cash flow and we will prudently and opportunistically allocated.

Please mark your calendars for our annual Investor meeting in New York on Thursday November 19th.

We appreciate your continued interest in jewelry retail.

And operator, now I'd like to open the lines for questions.

Thank you if you would like to ask a question. Please press star one on your telephone keypad, if you're using a speakerphone. Please make sure function is turned off how about your signal to sneak one that again that is the star one.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach the equipment. Again, that is star one. We'll go first to Eric Sheridan at UBS.

We'll go first to Eric Sheridan.

Thanks, so much for questions a lot in there. So maybe two if I can offer to the virus disruption to the inventory and sort of your your your food chain is are we to quantify what you're seeing of how that might translate I'd love to headwind.

Eric Sheridan: Thanks so much for questions. A lot in there. Maybe two, if I can. On the virus disruption to the inventory and sort of your food chain, is there a way to quantify what you're seeing of how that might translate into headwinds to revenue, either in Q1 or Q2? Obviously, it's a moving situation, so nobody has an edge probably much beyond those types of time periods. Is there a way to quantify what you're seeing in real time, so we can translate into what kind of headwinds you're seeing as potential for the business going forward? To Jeff's part of the commentary, there's a lot to unpack in there.

Revenues in Q1 or two obviously, it's moving situation. So nobody has some edge probably much beyond those touch type your which brings the way to quantify is what you're seeing in real time. So we can translate into what kind of headwinds you're seeing a as potential for the business going forward and then Jeff's a part of the commentary there was a.

I'm talking there just wanted to know better.

Eric Sheridan: Just wanted to know if we could better get some better granularity on sort of the headwinds and tailwinds without guidance per se. As you look out to 2020, and you're lapping against some things that were headwinds and tailwinds in the margin structure in the business, how to better sort of throw some guardrails around that. Thanks so much, guys.

Gets better granularity I'm sure the headwinds tailwinds without guidance per se, but as you look out 2020, and you're lapping against something similar headwinds and tailwinds in the margin structure of the business how to better sort of person guardrails around that thanks, so much guys.

Thanks, Eric I'll take the first one and then Jeff will pick the second on on the virus disruption. It is very hard to assess the impact so.

Mike George: Thanks, Eric. I'll take the first one, and then Jeff will take the second. On the virus disruption, it is very hard to assess the impact. You know, today, I would say everyone's best guess is that we're looking at a 3 to 4 week in production, given the time the factories have been closed, maybe another 4 to 6 weeks of transportation risk, given the various bottlenecks that are anticipated. Clearly a slowdown in getting product to all of our markets. How quickly those factors are able to ramp back up, whether there are future outbreaks, and then most importantly, our ability to shift out of the products we were anticipating coming and lean into other products, all impact the result.

Today, I would say that everyone's best guesses that we're looking at a three to four week.

And.

And production.

Given that the time the factors have been closed maybe another four to six weeks transportation risk given the various bottlenecks that our anticipated.

So clearly a slowdown in getting product.

Two.

All of our markets.

How quickly those factors are able to ramp back up whether their future outbreaks.

And then most importantly, our ability to shift out of the products, we were anticipating coming and lean into other products.

All impact the result, so fortunately with the QVC and HSN models, where were making decisions every day as to what items to script out in the show.

Mike George: Fortunately, with the QVC and HSN models, where we're making decisions every day as to what items to script on the show, if an item's not available, we can go to something else. In the short term, you know, we see relatively limited sales impact. If some of our big, you know, Today's Special Value or other really significant programs were to get materially delayed, you know, we would unlikely be able to adjust enough to fully offset that pressure. At this point, it's a little too early to see that.

It's an items not available we can go to something else.

So in the short term, we see relatively limited sales impact if some of our big today's special value or other really significant programs where to get materially delayed.

I would likely be able to adjust enough to fully offset that pressure.

But at this point, it's little too early.

Two.

To see that.

Mike George: We expect some impact, very hard to dimensionalize if it'll be significant or not, with the exception of zulily, which, as I mentioned, has seen an immediate sales hit, on top of the base sales pressures they've been experiencing, because they have a more immediate relationship to those supply pressures. Jeff, I'll let you take the second question.

So we expect some impact very hard to dimensionalize, it will be significant or not with the exception as it relate which as I mentioned has seen an immediate sales hit on top of the base sales pressures they've been.

Experiencing.

Because they have a more immediate relationship to those supply.

Pressures.

And then Jeff I'll, let you take the second question.

I think he's having some technical difficulties or do you want to take that one.

Jeffrey A. Davis: Mike, I think he's having some technical difficulties, if you want to take that one.

Jeff Davis: Mike, I think he's having some technical difficulties, if you want to take that one.

So I think your question, Eric with restaurants had headwinds and Tailwinds and 2020.

Mike George: I think your question, Eric, was just around kind of headwinds and tailwinds in 2020. I'll try to summarize it at a high level, and if Jeff can get back on, he can add to it. You know, the biggest pressure point is network optimization, which is causing a negative impact on both the freight and fulfillment lines. That pressure does get better later in the year, but we do expect 2 to 3 quarters of pressure with some improvement as we get late in the year. That ultimately flips to a positive impact on the P&L, but we'll have pressures through a large part of this year. That gets better.

So I'll try to summarize it at a high level in the Jeff can get back on he can add to it.

The biggest.

Pressure point is network optimization, which is probably the negative impact on both.

The freight and fulfillment lines that pressure does get better later in the year.

We do expect.

Two to three quarters of pressure with some improvement as we get late in the year ultimately flipped to a positive impact on the TNL.

Well have pressures to a large part of.

This year.

And then that gets better.

Mike George: The other pressures on the P&L are just the fact that we didn't pay incentive compensation last year, so we've got, we'll have some incentive cost built in our fixed costs. As you know, we continue to invest in performance marketing. That's a little bit more of an evergreen investment. We've generally been able to more than offset that through the synergies. I would say the big variable in the year, we feel pretty good about product margins and the work we're doing to improve product margins. The big, big variable in the year is, you know, both sustaining the investment in performance marketing and getting through this bubble of cost with network optimization, which will be negative in the front half, start to gradually turn more positive as we get later in the year.

Other pressures on the Pinedale are just the fact that we didnt pay incentive compensation last year. So we've got to we'll have some incentive.

Cost in built in our fixed cost.

As you know we continue to invest it performance marketing, that's a little bit more of an evergreen investment, we've generally been able to more than offset passed through the synergies. So.

I would say that big variable in the year, we feel pretty good about product margin doesn't work, we're doing improved product margins.

So the VIX big variable in the year is both sustaining investment in performance marketing and getting through this bubble up cost with network optimization.

Which will be negative in the front half start to gradually turn.

More positive as we get later in the year.

Thanks.

Well go next to Edward or not at Keybanc capital markets.

Edward Yruma: Thank you.

Eric Sheridan: Thank you.

Gregory B. Maffei: We'll go next to Edward Yruma at KeyBanc Capital Markets.

Operator: We'll go next to Edward Yruma at KeyBanc Capital Markets.

Hey, guys. Good morning, Thanks for taking the questions I guess first Mark a housekeeping question just as they do some math on on 2019, how much of a lift was the closure of France to gross margin and just kind of trying to think about in context as you will lap. It in March and then second I know you had some comments on expanding easy pay I guess what.

Edward Yruma: Hey, guys. Good morning. Thanks for taking the questions. I guess first, more of a housekeeping question. Just as we do some math on 2019, how much of a lift was the closure of France to gross margin? Just kind of trying to think about in context, as you will lap it in March. Then second, I, I know you have some comments on expanding Easy Pay. I guess, you know, what what % of sales is Easy Pay today? Where do you want it to get to? Just help assure us that you won't see some of the difficulty that you did, I think, with some sloppy pay behavior about 2 years ago. Thank you.

What percent of sales an easy pay today, what you wanted to get too and just help assure us that you won't see some difficulty that she did I think with some sloppy pay behavior about two years ago. Thank you.

Well, let me start with easy pay question.

Mike George: Let me, let me start with the Easy Pay question. You know, we do use Easy Pay. We've offered it on a substantial number of our products over the years, and, and I'm just speaking to the US market now. It's a little different internationally. We did make the decision at the start of the year to offer it on substantially all items. Customers then have a choice as to whether they take that offer or just pay, pay full price, and some, some do both. We don't...

So.

We do use easy pay.

We've offered it on a substantial number of our products.

Over the years and and I'm, just sticking to the U.S. Mark asked a little different internationally.

We did make the decision at the start of the your to offer it on substantially all items.

Okay, we're going to have a choice as to what do they take that offer or just pay full price said some some do both.

So we don't when we think about impact on.

Mike George: You know, when we think about impact on the P&L of expanding Easy Pay offerings, we don't anticipate a substantial impact from that program because it's largely trying to codify where we've been going previously, which is to, again, make it broadly available as a consumer benefit of shopping with Q and H. To me, that's the new normal. We feel good about that program. We think it just enhances the value offering to the consumer, gives us one more reason to shop and to make the experience easy because you don't have to worry about which item is gonna get Easy Pay. Effectively, kind of universal Easy Pay is a go-forward approach at Q and Flex Pay at H.

The personnel have expanded use be offerings, we don't necessarily see a substantial we don't anticipate a substantial impact from that program because it's largely kind of caught a five where we've been going I previously wishes to get make it broadly available as a consumer benefit of shopping with Q and age.

So so to me that's the new normal we feel good about that program. We think it's just enhances.

The.

Value offerings.

As a consumer.

Gives us one more reason to the shop end to end to make experienced easy because you don't have to worry about which side and that's going to get easy pay.

So.

Actively kind of universal easy pay at the go forward approach at Q flux pay at.

Mike I don't know suggested that.

Mike George: I don't know if Jeff is back.

Jeffrey A. Davis: Yes.

Jeff Davis: Yes.

Yes, yes.

Mike George: Can you hear me?

Jeffrey A. Davis: France?

Jeff Davis: France?

The France, we can you can pick the France question.

Mike George: We can. You can take the France question.

Jeffrey A. Davis: Okay. I, I did not hear the France, France question. I was getting redialed back in. Could they ask the question one more time, please?

Jeff Davis: Okay. I, I did not hear the France, France question. I was getting redialed back in. Could they ask the question one more time, please?

I did not get offensive French question I was getting we dial back and they asked the question one more time please.

Yeah I was just trying to understand I know you cited in the gross margin commentary press release that.

Edward Yruma: Yeah, I was just trying to understand, I know you cited in the gross margin comment and press release that France, you know, the closure of France, was a lift to gross margin. I'm trying to understand kind of what was its aggregate impact in 2019, and then I know you're gonna begin to lap the closure, I think, in March of this year, so try to understand the dynamics there. Thank you.

France.

Did the closure of France, or the lift to gross margin trying to understand what was the aggregate impacting play 19, and then I know you're going to begin to lap. The closure I think in March of this year, so try to understand that and amex that thank you.

Yes. Thank you about 50% of the margin improvement overall was related to to France and the the closure.

Jeffrey A. Davis: Yes, thank you. About 50% of the margin improvement overall was related to, to France and the the closure that occurred earlier this year.

Jeff Davis: Yes, thank you. About 50% of the margin improvement overall was related to, to France and the the closure that occurred earlier this year.

That occurred earlier this year.

Thank you.

Edward Yruma: Thank you.

Well it was next to Oliver Wintermantel at Evercore ISI.

Gregory B. Maffei: We'll move next to Oliver Wintermantel at Evercore ISI.

Operator: We'll move next to Oliver Wintermantel at Evercore ISI.

Yeah. Thanks, Thanks, very much. The other question you mentioned that free cash flow you expect that to improve in it 2020 and I was.

Oliver Wintermantel: Yeah, thanks. Thanks very much. I had a question. You mentioned that free cash flow, you expect that to improve in 2020, and I was just wondering to see what the use of that free cash flow would be in 2020.

Just wondering too to see what the use of free cash flow would be.

It's funny.

Well why did you. This is Greg Mike why don't you get a if you want to add anything about the operating free cash flow and how you feel about it and then I'll talk about uses.

Gregory B. Maffei: Well, why don't you-- This is Greg. Mike, why don't you just, if you wanna add anything about the operating free cash flow and how you feel about it, and then I'll talk about uses.

Greg Maffei: Well, why don't you-- This is Greg. Mike, why don't you just, if you wanna add anything about the operating free cash flow and how you feel about it, and then I'll talk about uses.

Yeah, I would say, we feel really good about.

Mike George: Yeah, I would say, you know, we feel really good about our ability to continue to expand free cash flow conversion in 2020. Number of programs, in addition to all the efforts we're doing to strengthen operating performance as we move towards the latter part of the year, a number of programs to improve working capital efficiency, some new trade payable terms, among other actions. Coupled with just a lower level of capital spend as we move through some of the bubble of our network optimization work, as well as somewhat lower payments to our distribution partners. We, we think this can be a good year for expanded free cash flow conversion. I'll let Jeff talk. I'll let Greg talk about use of cash.

Our ability to continue to expand free cash flow conversion and that.

2020.

Number programs. In addition to all the efforts were doing to strengthen OIBDA performance as we move towards the latter part of the year.

A number of programs.

[noise] to improve working capital efficiency as we do trade payable terms among other actions.

Coupled with just a lower level of capital spend as we move to some of the bubble of our network optimization work.

As well as Alan.

Look somewhat lower payments to our dished distribution partner so.

I think this can be a good year for expanded free cash flow conversion and then I'll, let Jeff talked I looked at Greg talk about use of cash.

So I think we outlined the places where we're focused first investing into business.

Gregory B. Maffei: I think we outlined the places where we're focused. First, investing in the business, and second, managing our tax exposure. Let's talk about that one for a sec. We have, as you know, gone out and repurchased a bunch of the exchangeable bonds. We've hedged a bunch, and I think we'll continue to look at ways to manage that down and potentially including investing in other kinds of tax advantage investments or the so-called green investments that we've made to date, that if we think of that generated very attractive IRRs and returns on capital. As far as returning capital to shareholders, we remain cautious. There's volatility both in the business and in the marketplace, and we'll wait through the year as the year goes through, on rather, what we do with capital in that regard.

Greg Maffei: I think we outlined the places where we're focused. First, investing in the business, and second, managing our tax exposure. Let's talk about that one for a sec. We have, as you know, gone out and repurchased a bunch of the exchangeable bonds. We've hedged a bunch, and I think we'll continue to look at ways to manage that down and potentially including investing in other kinds of tax advantage investments or the so-called green investments that we've made to date, that if we think of that generated very attractive IRRs and returns on capital. As far as returning capital to shareholders, we remain cautious. There's volatility both in the business and in the marketplace, and we'll wait through the year as the year goes through, on rather, what we do with capital in that regard.

And second managing our tax exposure, so let's talk about that one for SEC, yet, but as you know going out and repurchased a bunch of exchangeable bond we've hedged a bunch I think we'll continue to look at ways to manage that down potentially including investing in other kinds of tax advantage investments for the so called Green investments that we've made to date that and we think about.

Generated very attractive IR ours.

And returns on capital as far as returning capital to shareholders. We remain cautious there's volatility both in the business out of the marketplace and we will wait for the year as as the year goes through on rather.

We do with capital on the in that regard.

Thanks very much.

Oliver Wintermantel: Thanks very much.

Well take our next question from Heather Balsky, a bank of America.

Gregory B. Maffei: We'll take our next question from Heather Balsky at Bank of America.

Operator: We'll take our next question from Heather Balsky at Bank of America.

Hi, Thank you for taking my question I was hoping you could talk a little bit more about your shipping and handling strategy.

Heather Balsky: Hi, thank you for taking my question. I was hoping you could talk a little bit more about your shipping and handling strategy. You, you spoke a little bit at the November Investor Day, also it looks like shipping and handling at QxH was, was down a bit in Q4, just based on my math. Just curious what's going on there. Thanks.

He spoke a little bit at November Investor Day, and also it looks like shipping and handling at Qxh, which was down at that and the fourth quarter. Just if my math. So just curious if I heard that thanks.

Yes, thanks, Thanks Heather.

Mike George: Thanks, Heather. You know, I would say we just continue to evaluate both, both at an item level and an event level, how we wanna deploy shipping and handling. You know, we have gradually reduced shipping and handling revenue, and a little more substantially in Q4, as we have focused on making sure that we are competitive. It takes a couple of forms. One form is that we include shipping and handling with the price of the item, where we think that that's sort of a market standard to do so. We also run events, all-day events, flash events, where we'll offer free shipping as a benefit. You, you expect that to be higher in Q4. We definitely see that.

I would say, we just continue to evaluate.

Both both at an item level and in the event level, how we want to deploy shipping and handling.

We have gradually reduced shipping and handling.

Revenue and a little more substantially in Q4.

As we have focused on making sure that we are a competitive.

Got it takes a couple of forms that takes.

And some one form is that we include shipping and handling with the price of the item.

Well, we think that that's sort of a market standard to do so and anda.

And then we also run events all day events flash events, where we'll offer free shipping as a as a benefit.

You expect that to be higher in Q4, we definitely see that.

Mike George: The, the promotional intensity, you know, goes up every Q4. It was high a year ago. It was high, this year, compounded by the short selling season. So a little bit more intensity on those key weekends to make sure you're as competitive as you could be. I would note that even with a pullback in shipping and handling revenue, as we got more aggressive on promotions, you'll note that our impact of product mix or product margin was about flat, very, very slightly down. That shipping and handling cost shows up in product margin. We were able to offset the shipping and handling investment with improvement in product margin rate.

Promotional intensity goes up every Q4 it was high a year ago. It was high this year compounded by the short selling season.

And so little bit more intensity on those key weekends to make sure your as competitive as you could be.

I would note that even with a pull back and shipping and handling revenue as we got more aggressive on promotion.

You'll note that our.

Impact of product mix or product margin was about flat.

Very slightly down.

And that shipping and handling cost shows up in product margin. So we were able to offset.

The shipping and handling investment.

The improvement in product margin rate, so felt good about our ability to be pretty competitive in the marketplace, but also offset from that shipping and handling investment.

Mike George: Felt good about our ability to be pretty competitive in the marketplace, but also offset some of that shipping and handling investment in product margin rate. You know, as we move forward, for us, it's all about continuing to work with our vendors to make sure we have the most optimized costing we can get, and then to make the right surgical choices as to how to bring that item forward and what mix of, you know, price, promotion, S&H we use to deliver value to the consumer, but also get to the margins that we need.

Product margin right.

And so you know as we move forward for us it's all about continuing to work with our vendors to make sure we have the most optimized.

Cost cutting we can get and then to make the right surgical choices as to.

How to bring that item for it and what mix of.

Price promotion SNH, we used to deliver value to the consumer but also to get to the margins that we that we need.

If I can think also Mike you bring up the point working with our suppliers and supporting a number of these events one of the elements that supports us from a product margin also is when the vendor will provide us support for shipping and handling on certain items and or events, which also helps us to maintain that overall.

Heather Balsky: Thanks-

Gregory B. Maffei: If I could add to that, also, Mike, you bring up the point, working with our suppliers and supporting a number of these events. One of the elements that supports us from a product margin also is when the vendor will provide us support for shipping and handling on certain items and/or events, which also helps us to maintain that overall margin rate.

Greg Maffei: If I could add to that, also, Mike, you bring up the point, working with our suppliers and supporting a number of these events. One of the elements that supports us from a product margin also is when the vendor will provide us support for shipping and handling on certain items and/or events, which also helps us to maintain that overall margin rate.

Margin rate.

Yeah, and that's another question and he talked about.

Heather Balsky: Thank you. As another question, you talked about 10 brands representing 12% of your sales and all of your decline. Can you talk about the other 88% of your business and what you're seeing in different categories across that? Is the rest of the business growing, then?

10 brands, representing 12% of your sales and all of your decline can you talk about the other 88% of your business and what you're seeing in different categories across that had how do we think it's it's a restaurant. This growing then.

So you know I mean, the Damascus the rest of the business is growing in aggregate right because those 10 are more than 100%.

Mike George: You know, I mean, the math is the rest of the business is growing in aggregate, right? Because those 10 are more than 100% of the decline. Again, I want to be a little cautious with that fact, because you always have big brands that are in decline. It's just the nature of this business. It's all about moving brands up a life cycle and then managing them down a life cycle. I would say right now, we're feeling sort of the-...

A decline and again I want to get a little cautious with that fact, because you always have big brands that are in decline. It's just the nature of this business. It's all about moving brands up a lifecycle and then managing them data lifecycle, but I would say right now we're feeling sort of the.

The double pressure of.

Mike George: the double pressure of, a little bit greater pressure from that sort of top brand phenomenon decline, a little bit compounded this year by the fact that a couple of those brands are associated with this Ingenious Designs business that we closed, so they were kind of unanticipated exits, and those are obviously much harder to manage. A little more pressure from that top brand decline. While the other brands are, in aggregate, growing, we're just-- they're just not growing at quite the rate to get us to positive total growth.

A little bit greater pressure from that sort of top brands phenomenon decline a little bit compounded this year by the fact that a couple of those brands are associated with this ingenious designs business that we close or they were kind of unanticipated exits.

And those are actually much harder to manage so little more pressure from that top brand decline and while the other brands are in aggregate growing we're just they're just not growing at quite the rate to get us to positive total.

And that's where.

Mike George: That's where, kind of all the actions I described on product curation are all about, you know, feeding the top of the funnel with a broader range of brands, getting more creative about how we nurture those brands through the life cycle, knowing that it's a crowded marketplace for brands today, and just making sure we're using the platform in the best way to tell the best stories, to find even more unique offerings, like through our Big Find program, more exclusive offerings through our own development program.

All the actions I described on product duration are all about.

Feeding the top of the final with a broader range of brands getting more creative about how we nurture those brands to the lifecycle known that it's a crowded.

Marketplace for brands today, and just making sure we're using the platform in the best way to tell the best stories defined even more unique offerings like to our pick fine program.

More exclusive offerings to our own development programs, we just don't finding that we need to none of those things are brand new to Arsenal, but we need that use those things at an even higher level of intensity.

Mike George: None of those things are brand new to our arsenal, but we need to use those things at an even higher level of intensity to get to the most moderate declines among the top brands, and more importantly, get all the other brands to be growing at an even faster rate.

To get to the most moderate declines among the top plans and more importantly get all the other brands to be growing at an even faster right.

Okay. Thank you.

Operator: Great. Thank you.

Heather Balsky: Great. Thank you.

Well go next to Alex Fuhrman.

Gregory B. Maffei: We'll go next to Alex Fuhrman at Craig-Hallum Capital Group.

Operator: We'll go next to Alex Fuhrman at Craig-Hallum Capital Group.

Okay.

Great. Thanks, very much for taking my question I'm, you know wanted to ask about your different product categories. It seems like a consumer electronics was was up for you guys in in 20, Nineteena Qxh, where whereas the other categories were negative I know, it's early but just looking into 2020 do you feel that there is sufficient innovate.

Alex Fuhrman: Great. Thanks very much for taking my question. You know, wanted to ask about your, your different product categories. It seems like consumer electronics was, was up for you guys in, in 2019 at QxH, whereas the other categories were negative. I, I know it's early, but just looking into 2020, do you feel that there is sufficient innovation out there in the consumer electronics landscape for that product segment to continue to grow for you? Or do you think other categories might be taking over, as, as leadership for you this year?

Asian out there in the consumer electronics landscape for that product segment to continue to grow for you or do you think other categories might might be taking over as as leadership for you. This year.

Yeah, I think thanks for the question out the I think it is early to tell I wouldn't say that it feels that the innovation is so compelling that where we're confident in that business.

Mike George: Yeah, I think. Thanks for the question, Alex. I think it is early to tell. I wouldn't say that it feels that the innovation is so compelling that we're confident in that business. You know, we tend to. Our mindset has always been that we'll have up years and down years with consumer electronics based on the cycle. So let's get everything else growing in as consistent a way as we can, and then we can either benefit from electronics or try to mitigate any negative impacts. I mean, certainly in some spaces, you know, audio trends continue to be hot and new items there, and wearables as well.

You know we tend to our mindset has always been but we'll have up years and down years with consumer electronics based on the cycle and so let's get everything else growing and that's consistent of ways. We can.

Then we can either benefit from.

Electronics or try to mitigating a negative impacts I mean, certainly in some spaces audio continues to be audio trends continue to be.

Pot and new items, there and wearables as well, but we have seen a slowdown in smart home.

Mike George: We have seen a slowdown in smart home as that business just took off very rapidly, and now we're anniversarying those big increases in smart home. That is, I would say, for now, moderating. The places where we are seeing growth do tend to be lower ASP than the classic, you know, computer, tablets, TV market. I would say it's this category we approach cautiously in 2020, not necessarily looking to huge growth, but also not sure we face huge pressure either.

As that business just took off very rapidly and now our anniversary ing, those big increases and and smart home and so that is I would say for now moderating.

And of course, the places where we are seeing growth to be tend to be lower ASP and the classic computer tablet TV market. So I would say to I would say this category. We approach cautiously in 2020, not necessarily look into huge growth.

But also not but also not sure we faced huge pressure either.

Okay. That's very helpful. Thank you.

Alex Fuhrman: Okay, that's very helpful. Thank you.

Well go next to Tom working at the 18.

Gregory B. Maffei: We'll go next to Thomas Forte at D.A. Davidson.

Operator: We'll go next to Thomas Forte at D.A. Davidson.

Great. Thanks, Mike Slessor comments is already.

Thomas Forte: Great. Thanks. Thanks, Mike, for your thoughtful comments as always. On the coronavirus, though, I wanted to ask about how should we think about broadly its impact on the business from a disruption standpoint, disrupting the consumer, and then how should we think about it in geographies that are affected, such as Italy?

Well the virus.

Asked about how should we think about.

That's impacting your business for me.

Disruptions standpoints disrupted the consumer and then how should we think about it in geographies such as such as Italy.

Yeah. Thanks, Tom.

Mike George: Yeah. Thank-thanks, Tom. It, it's, you know, it's a good question. It is hard for us to read. I would just take a moment to recognize and appreciate all of our team members in Italy. We are headquartered in Milan, so they're going through a tough time right now, and I'm grateful for that leadership team and all their efforts to make sure our, our team members and, and partners in Milan are safe. So far, we've been able to operate the Milan business without disruption, but certainly taking it day by day, and, and certainly our Japanese team members and, and China team members have felt the brunt of this as well. I would say that to date, we're not sensing any meaningful impact on consumer demand to our, to our markets.

You know that's a good question that it's hard for us to read I would just take a moment too.

Recognize that appreciate all of our team members in Italy, we are headquartered in Milan, so they're going through a tough time.

Right now to grateful for that leadership team and other efforts to make sure our team members and partners in Milan are safe.

So far we've been able to operate the Milan business without.

Disruption, but certainly taking it a day by day and certainly our.

Japanese team members and China team members have.

At the front of this as well I would say that state.

We're not as and seen any meaningful impact on consumer demand.

To walk through our markets.

Mike George: We're not seeing the kinds of pressures folks with, say, big, brick-and-mortar businesses in Asia or folks that are heavily dependent on tourist trade, how they're seeing it. The wild card for us is the one you've hit on, if it just creates a substantially negative halo on consumer sentiment. Obviously connected to that, we know our consumer is sensitive to the stock market, that intersection of stock market pressures and consumer sentiment pressures certainly could impact demand. We haven't seen it to date, depending on how this plays out, we can't rule out that risk.

So we're not seeing the kinds of precious folks would say big brick and mortar businesses in Asia for folks are heavily dependent on tourist tray, how they're seeing that the wildcard for us as the when you've hit on it is is if it just creates a substantially negative halo on consumer sentiment.

And obviously connected to that it we know our consumers sensitive to the stock market.

So that intersection of stock market pressures in consumer sentiment pressure certainly could impact demand we haven't seen it today.

Depending on how this plays out we can't rule out that risk.

Great. Thanks.

Thomas Forte: Great. Thanks, Mike.

Well go next to Jason Bazinet City.

Gregory B. Maffei: We'll go next to Jason Bazinet at Citi.

Operator: We'll go next to Jason Bazinet at Citi.

Okay, I hate to that labor at this point in time, just go back to the margin international margins in the release it implies that the France closure was was sort of so large that was offset by bunch items that the aggregate margin expansion, we saw was smaller than.

Jason Bazinet: Okay. I hate to deviate at this point. Can I just go back to the margin, international margins? In the release, it implies that the France closure was, was sort of so large, and it was offset by a bunch of items, that the aggregate margin expansion we saw was smaller than, than the impact that the France closure would have had if you didn't have all those other offsets. In the Q&A, you said the France closure was 50%, if I heard you right, of the overall margin expansion in international. I just got confused. Can we just go back to that and clarify?

The impact that the French closure would have had if you didn't have all those other offsets yet in the queue and how you said the French closure was 50% if I heard you right of the overall margin expansion in international.

I just got confused can you can we just go back to that can clarify.

Yep.

Jeffrey A. Davis: Yeah. Essentially, the France business, which in 2018 would have had some losses associated with that business as you were going through 2019, you would not have been incurring those losses as a result of the exit of that market in, you know, mid-March. That was actually a year-over-year sort of tailwind for us as we were going through the course of the year.

Jeff Davis: Yeah. Essentially, the France business, which in 2018 would have had some losses associated with that business as you were going through 2019, you would not have been incurring those losses as a result of the exit of that market in, you know, mid-March. That was actually a year-over-year sort of tailwind for us as we were going through the course of the year.

So essentially the the France business, which when 2018 would have had some.

Some losses associated with that business as you were going through 2019, you would not have been incurring those losses as a result of the exit of them that market in mid March.

So that was actually a year over year.

Sure a tailwind for us as we were going through the course of the year.

The other offsets to that though we're really for the.

Gregory B. Maffei: Yep.

Greg Maffei: Yep.

Jeffrey A. Davis: The other offsets to that, though, were really for the international markets, somewhat in fixed costs, as they were continuing to take actions with respect to their operating model. You know, as Mike had mentioned, some of the actions they were taking with respect to centralizing and regionalizing a number of their efforts.

Jeff Davis: The other offsets to that, though, were really for the international markets, somewhat in fixed costs, as they were continuing to take actions with respect to their operating model. You know, as Mike had mentioned, some of the actions they were taking with respect to centralizing and regionalizing a number of their efforts.

International markets.

Somewhat in fixed cost as they were continuing to take actions with respect to their cod operating model and.

As Mike had mentioned some of the actions they were taking with respect to centralizing and Regionalizing number of their efforts.

But the but the into the losses that we were occurring in France must have been quite large just at the right take going but we just didn't see the full benefit because those offsets I just don't understand how you got 50% of the overall.

Gregory B. Maffei: The losses that were occurring in France must have been quite large. Is that the right takeaway? We just didn't see the full benefit because of those offsets. I just don't understand how you got 50% of the overall margin expansion was France-related. It's more than 100%, is it not?

Greg Maffei: The losses that were occurring in France must have been quite large. Is that the right takeaway? We just didn't see the full benefit because of those offsets. I just don't understand how you got 50% of the overall margin expansion was France-related. It's more than 100%, is it not?

Margin expansion was France related it's more than 100% huh.

No.

Jeffrey A. Davis: No. No, it's not.

Jeff Davis: No. No, it's not.

No it's not.

Okay I'll take it offline alright, thank you yes.

Gregory B. Maffei: Okay. I'll take it offline. All right. Thank you.

Jason Bazinet: Okay. I'll take it offline. All right. Thank you.

Jeffrey A. Davis: Yes.

Jeff Davis: Yes.

Great. Thank you all for your interest in Jerry Thank you for your questions.

Gregory B. Maffei: Great. Thank you to all for your interest in Qurate Retail. Thank you for your questions. As always, we look forward to speaking with you on next quarter's call, if not before. Thanks very much to the team in Seattle, the team in Pennsylvania, and here in Colorado. With that, operator, I think we're done.

Greg Maffei: Great. Thank you to all for your interest in Qurate Retail. Thank you for your questions. As always, we look forward to speaking with you on next quarter's call, if not before. Thanks very much to the team in Seattle, the team in Pennsylvania, and here in Colorado. With that, operator, I think we're done.

As we look forward to speaking with you.

Next quarter's call if not before thanks very much to the team in Seattle semen.

Pennsylvania here in Colorado with that operator, I think we're about.

Thank you and that does conclude today's conference again, thank you for your participation.

Operator: Thank you. That does conclude today's conference. Again, thank you for your participation.

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