Earnings Call: Q1 2021

May 7, 2021

As a reminder, this conference is being recorded, May 7. I would now like to turn the conference over to Courtney Chun, Chief Portfolio Officer, please go ahead, ma'am. 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 Forms 10 ks and 10 Q filed by our company and QVC with the SEC. These forward looking statements speak only as of potential measures, including adjusted OIBDA, adjusted OIBDA margin, free cash flow and constant currency. Information regarding the comparable GAAP metrics along with required definitions and reconciliations, including preliminary note in schedules 1 through 3 can be found in the earnings press release issued today on our earnings presentation, which are available on our website. Today, speaking on the earnings call, we have Qurate Retail President and CEO, Mike George Qurate Retail Group CFO, Jeff Davis and available for Q and A, Qurate Retail Executive Chairman, Greg Maffei. Please note we published slides to accompany the earnings release. And I'll also point you to our annual report and the letter to shareholders, which provides an overview of the ongoing evolution of the business. It's a great read. Both of these documents are available on our website. Now, I'll hand the call over to Mike. Thank you, Courtney, and good morning, everyone. Thank you for joining us today and for your interest in Qurate Retail. I'm delighted to report outstanding results for the Q1. Our team delivered strong top and bottom line growth across every business unit and every market, Driving 13% revenue growth and 32% OIBDA growth in constant currency. This is our best quarterly performance the formation of Qurate Retail in 2018. We built sales momentum through the quarter driven by the reemergence of the fashion business And improving customer sentiment aided in part by stimulus actions. We drove broad based customer gains across all business units. We welcomed 1,600,000 new customers in the quarter, up 35% from the prior year and served 10,800,000 total customers, 9%. We also made important progress on key corporate responsibility initiatives. And this week published our inaugural corporate responsibility guided by the United Nations Sustainability Development Goals. It details our commitments and our ambitions to protect the environment, Qurate products responsibly and champion empowerment and belonging and also includes disclosure aligned with the SASB framework. So please check out the report at the Qurate Retail Group website. As part of this work, we're expanding our highly successful small business spotlight in 2021 to support 100 entrepreneurs of diverse backgrounds, providing them with on air and digital exposure And other pro bono services centered around heritage months, including National Military Appreciation Month, Pride Month And National Hispanic Month. Now through the pandemic, our team members' safety and well-being remains our paramount focus. And among other actions, we're providing all team members up to 8 hours of paid time off to facilitate vaccine adoption. We anticipate reopening our offices this September, employing a hybrid working model for most office based team members, Blending remote and on-site work based on their preferences and the needs of the role. This will enable us to consolidate our global real estate footprint and reduce operating costs in future years. Looking forward, we are encouraged by the macro environment, The strength of overall consumer demand, the rebound in fashion, the positive outlook for retail sales And the acceleration of digital trends. We continue to closely monitor supply pressures, inflationary challenges and any shifts in consumer spending But the unique combination of our extensive digital video ecosystem, highly differentiated customer experiences And strong and growing base of loyal shoppers is without rival and positions us well for the future as we emerge from the pandemic and adapt to the new realities. Turning to QXH, the team delivered outstanding revenue growth in the first we've experienced since the pandemic began with 5 of 6 categories growing or essentially flat. Jeff will provide more details. 2nd, this balanced category growth drove balanced customer performance. We continue to enjoy strong growth among new customers, up 20% in the quarter, and we remain encouraged by the projected lifetime value Of these acquired cash, 15% of last year's new class made a purchase in the Q1 of this year. That's a comparable rate to prior years, but with a much larger class. As a result, last year's new and reactivated class Gove approximately 1 third of our Q1 growth. Additionally, our best customers returned to growth with sales up 5% year over year. Now we've shared over the last year that best customer retention remains stable And we were confident that their sales would turn positive as the fashion business rebounded. Our OIBDA margin expansion Reflects in part the benefit of our multiyear effort to realize synergies from the HSN acquisition, such as our work on strategic vendor sourcing, Along with our disciplined promotional stance, we reinvested some of these savings in performance marketing and the expansion of our digital ecosystem to support long term healthy growth. Progress on our strategic priorities has in fact been fundamental To both sales and OIBDA games, curating special products at compelling values with stories that inspire and excite is the heart of our business. In the Q1, we built on strong customer followings developed with leading designers, influencers and entrepreneurs such as Leila Ali and Bethenny Frankel and We by Living in Yellow in the fashion category And Chef Ann Burrell in Culinary. We also continue to expand our product and brand range in on trend categories, Including in apparel launching Seed to Style featuring organically sourced cotton and in beauty e salon, a customized Home hair color system along with hair, skin and nail care brands Balsonic, Spa Ritual and Finishing Touch Flawless Salon Nails. And I'm pleased the lines of Estee Lauder that I mentioned on the last call performed very well. We also drove strong results on key events, capitalizing on opportunities to offer compelling virtual experiences Outside our studios, we broke sales records with our annual St. Patrick's Day event, taking the customer to Ireland for inspiration. In gardening, we took the customer to greenhouses and nurseries and into the backyards of our favorite guests, offering an incredible selection of plants, Tools, equipment and decorative garden accents from our portfolio of national, exclusive and private label brands. And we educated the viewer on how to achieve the perfect outdoor oasis. These events are just a few examples Of our ability to translate our strengths in content and entertainment and in product curation into captivating moments That attract large audiences and drive high sales volumes. We expanded our leadership in multicultural beauty, And launching new brands, butter and Urban Skin Rx. We continue to extend video reach and relevance, ensuring we have relevant fresh content across traditional, new and emerging platforms. In late March, we teamed with Firdie, A shoppable online and mobile beauty content platform, we created a year long live stream collaboration of Quarterly programming called the Birdie Beauty Hour, helping viewers discover the best in skincare and beauty, featuring editorial insights and products YouTube, qvc.com, our QVC 2 channel, OTT Devices, birdie.com and birdie's social presence. This collaboration is one of many examples of how our strategic initiatives across product curation, digital video and social engagement, Content creation and marketing and community building come together to create a compelling platform for retail brands and content partners alike to access large attractive audiences. Now turning to QVC International, the team delivered another strong performance Double digit top line growth, significant organic margin expansion, customer growth in all markets and gains across all categories, The consistent strength of our international markets over many years further reinforces our confidence And the long term health and vitality of our global shopping platform. Zulily built momentum This quarter with significant new brand launches such as Landen, Benefit Cosmetics and Ann Taylor, Continued growth of its factory direct platform, strong gains across home, apparel and beauty and Standy new customer growth up 81% supported by more diversified marketing programs. So Lilly is uniquely positioned, one of the few scaled profitableecommerce pure plays Targeting moms is focused on the burgeoning off price segment with a loyal following of high value customers. We're bullish about its long term growth prospects as the team executes on great fresh finds, daily discovery through frictionless personalized shopping, frictionless personalized shopping and diversified marketing to sustain high levels of customer acquisition. And at Cornerstone, the team delivered extraordinary revenue growth, topping 40% with the continued surge in home spending, benefiting Frontgate, Ballard Designs and Grandin Road. Garnet Hill also had a terrific quarter on the strength of home textiles And a rebound in apparel. We are especially excited about the long term cost. Extremely proud of our Qurate Retail team, Delivering outstanding results with broad based gains across all businesses and markets, balanced across customer segments, categories and digital platforms. But more important than what the team achieved is how they achieved it. With an unwavering focus on the customer, With care and concern for each other's well-being through the darkest days of the pandemic, with an unrelenting commitment to driving innovation and advancing our strategic priorities and with the renewed dedication to creating a culture of belonging, Now, I recognize that some Skeptics may attribute recent strong results exclusively to stay at home tailwinds and conclude that we may struggle post pandemic. So I'd like to take this head on and recap why we believe our business that exits the pandemic is far enhanced Put simply, the environment in which we operate is forever changed And the progress we've made over many years of strategic investment positions us perfectly for the world we now face. The pandemic has accelerated many long standing trends in retail and created some new ones. Comfort with online shopping, use of video streaming services And engagement on social platforms are all time highs. These in turn are fueling a steady rise in live stream shopping, One of the most talked about retail trends of the last year. At the same time, the pandemic has brought about a renewed focus I'm creating a comfortable, productive and inspiring home life as work becomes more flexible and less office based. This is fueling demand for home related merchandise and further increasing consumer engagement with live TV, with live streaming and on demand digital video content. The role of trusted personalities and social influencers in discovery and purchase decisions continues to expand. And an ever growing portion of consumers demand that retailers and brands see everywhere they are with relevant, engaging, video rich experiences, seamlessly integrated across virtual and physical touch points. These massive shifts in consumer behavior Perfectly aligned with the strength of our business model and with the strategic investments we've made. We bring 4 unique and expanding capabilities to this evolving digital and home based lifestyle. I want to take a moment to comment on each of these four capabilities. First, we've built an expansive and innovative Digital Video Ecosystem. One of the fundamental keys to the adoption of live stream shopping in the West Is overcoming the fragmentation of video platforms and the cost of video reach. Our unique state of the art video platform Reaches 100 of millions of potential customers in a highly cost effective manner Through Pay TV with attractive channel placement and nearly all major cable and satellite providers across 7 countries and 14 networks, Reaching 81,000,000 homes in the U. S. And 124,000,000 homes outside the U. S, free over the air TV, Including an incremental 15,000,000 cord cutting or cord never homes in the U. S, digital live streaming TV And in the last 18 months alone, we've added placement on paid services like YouTube TV, Hulu Plus Live TV and AT and T Now and free services like Xumo It's smart TV streaming services such as Samsung TV Plus, LG Channel Plus and VIZIO SmartCast. Our interactive streaming shopping app between multiple QVC and HSN networks and extensive on demand content Available on Roku and Amazon Fire TV among other places with cumulative downloads of 68% and 2 80% respectively in the last year. And then on the LG Showtime app reaching 12,000,000 devices, extensive social streaming presence on Facebook Live, YouTube, Instagram and TikTok and the ability to move quickly to trial relevant new technologies and platforms when they emerge and our own QVC and HSN websites and apps, which integrate extensive live feeds and on demand videos throughout the shopping experience. 2nd, our scale and resources provide powerful benefits and tangible value and savings to our customers, Including thousands of buyers around the world on the hunt for amazing curated discoveries, their organization restructured over the last 18 months to significantly expand The resources focused on new product discovery, extensive global design, development and sourcing capabilities To translate great ideas into compelling merchandise for our own brands and in partnership with leading celebrities and influencers, With a significant expansion in the product categories, brands and influencers supported in the last 18 months, Multiple state of the art studios in 5 countries producing more high quality live content Than any other television programmer in the world, a fulfillment network nearing the completion of a multiyear restructuring in the U. S. Shopping experiences. 3rd, our unique content and customer experience. We have spent 40 years refining the art and science of telling engaging stories to live video shopping In ways that inform and inspire, drive impulse and urgency, build trust And lasting relationships and bring customers back to our platforms nearly every day. And we'll struggle to create enduring value. And 4th, this experience drives remarkable customer longevity and engagement, more akin to the stability of a subscription business than a typical retail model. As a result, we can promise any brand that comes on our platforms the opportunity to tell their story directly For the world's most engaged shoppers, in 2020, our best customers at QVC U. S. Represented 69 They engaged extensively on our social platforms. They purchased 69 items and they were retained At an astounding rate of 99% and these metrics have been remarkably stable year after year. Yes, customer loyalty and frequency has always been the foundation of our business and we've demonstrated through the pandemic That this experience is also relevant to historic numbers of new customers who are showing the same stickiness As prior generations equally likely as their forebears to become best customers. Now critics suggest that we are challenged with an aging customer base. It's a refrain we have heard for decades, But the facts are clear. Though I have regrettably aged 16 years since taking on this role, Our average customer hasn't aged 1 darn bit. In fact, the average age of our customer at QVC has Actually declined slightly. We are uniquely well positioned at this inflection point. As a leader In video commerce, e commerce, mobile commerce and social commerce, with a unique combination of capabilities and assets, Everywhere our customers, prospects and partners want us to be confident, confident we can deliver sustainable growth and generate strong cash flow for our investors for years to come. And with that, I'll turn the call over to Jeff. Thank you, Mike, and good morning, everyone. We delivered strong revenue and OIBDA growth at Qurate Retail for the quarter. Revenue grew 13% and OIBDA grew 32% on a constant currency basis. I'll remind you that Q1 2021 And one less day due to leap year in 2020. We estimate the one less day understated our year over year revenue growth By approximately 1 percentage point. Let's start with QXH. Revenue grew 8% Through continued momentum in the home category, growth of our customer base and reduced customer returns, largely driven by category E commerce revenue increased 12% and penetration improved 200 basis points. Total customers grew 8% with new growing 20%, reactivated up 10% and existing up 5%. As illustrated on Slide 7 of our earnings presentation, we continue to experience a swing in category mix Into home from primarily apparel. However, our first quarter mix shift Moderated to approximately 200 basis points from approximately 500 basis points in previous quarters. Revenue in home increased 14% with particular strength in gardening, spring decor, Gourmet Foods, fitness equipment, health supplements, face coverings and air purification. Consumer Electronics returned to growth, up 16% on strength in laptops, portable power, audio devices and smart home. And most importantly, the fashion categories rebounded as demand for beauty, apparel and jewelry recovered late in the quarter. Accessories grew substantially, up 12% on loungewear, non leather handbags, sunglasses and active footwear. Beauty declined slightly, reflecting gains in Bath and Body, Beauty Devices and Skin Care, offset by continued lower demand for color cosmetics. Apparel returns expanded 160 basis points. Looking at the components of adjusted OIBDA. Gross margin was relatively flat, Primarily due to favorable product margins offset by fulfillment pressure. The favorable product margins were primarily due to reduced customer returns, Strategic sourcing initiatives and promotional pullback, which more than offset category mix margin pressure. The fulfillment burden was due primarily to higher freight rates and surcharges, higher labor costs including COVID related pay, which were partially offset by sales leverage of fixed cost. Operating expense was 25 basis points favorable, primarily due to lower credit card fees and favorable commissions due to e commerce penetration, partially offset by higher customer service costs. SG and A Was a net 150 basis points favorable, primarily from favorable bad debt expenses that reflect lower customer default rates, reduced payment installments and comping conservative provision adjustments from the prior year, coupled with lower administrative expenses, Reflecting sales leverage and reduced travel expenses. These tailwinds were partially offset by elevated Marketing expenses to drive new customer acquisition, retention and brand awareness and rekindle relationships With avid and elite customers across fashion categories. Over the past several quarters, Adjusted OIBDA margin rates increased were largely led by product margin expansion, Commission leverage and improved bad debt expense. These advances were partially offset by freight rate increases, Network optimization and marketing investments to acquire and retain new customers and expand existing customer spend. Looking ahead to the remainder of 2021, we expect adjusted OIBDA margins to be relatively flat reduced productivity pressure as we exit our Lancaster and Roanoke fulfillment centers, continued marketing investments And relatively flat bad debt expense as we anniversary prior year favorable provision adjustments. These headwinds will be offset by network optimization investments turning to a tailwind, positive category mix impact And favorable administrative expenses. We recently completed the sale of our secondary corporate campus In Westchester, Pennsylvania, as part of our new hybrid work approach and a distribution center in Lancaster, PA, as Part of our network optimization program for total proceeds of $40,000,000 We will lease back the Lancaster facility through the end of the year in categories with strong customer gains, increased e commerce revenue and penetration. And my comments will focus on constant currency results. Revenue grew 15% with strong growth across all markets. Total customers grew 7% With new up 23%, reactivated up 6% and existing up 5%. E commerce revenue grew 25% and e commerce penetration increased 3.90 basis points. Business generated broad based gains in every category led by home, apparel and beauty. And our adjusted OIBDA increased 38% and adjusted OIBDA margin expanding 3 20 basis points. So gross margins improved 140 basis points due to higher product margins, which primarily reflect favorable product returns and pricing management. We also benefited from favorable fulfillment expenses driven by sales leverage and higher average selling price. These gains were partially offset by higher inventory obsolescence, primarily due to continued outlet store closures and proactive inventory management. Operating expenses were favorable by approximately 90 basis points, primarily due to commissions and customer service, reflecting higher e commerce penetration, sales leverage and renegotiated contracts. And SG and A was Moving to Zulily. Revenues grew 19%, driven by broad based gains across categories led by home, apparel and beauty, As well as customer gains and growth in its factory direct business. Total customers grew 12% And new customers, as Mike had mentioned, grew 81%. Adjusted OIBDA increased $4,000,000 And adjusted OIBDA margin expanded 100 basis points, primarily due to higher product margins and leverage of administrative expenses, Which was partially offset by higher fulfillment costs. Moving to Cornerstone, which was the strength of Core home decor, interior furnishings and outdoor categories and Garnet Hill accelerated growth From the Q4 on the strength of apparel and home textiles. E Commerce grew 46% With 250 basis points improvement in e commerce penetration. Adjusted OIBDA increased $29,000,000 primarily due to the leverage of administrative and marketing expenses and expanded product margins. These gains were partially higher fulfillment costs, primarily freight rates for TV distribution contract renewals, Approximately $130,000,000 Free cash flow was negative $6,000,000 in Q1. Free cash flow was burdened by cash outlays for accrued liabilities associated with prior year incentive bonuses, Multi year TV carriage contracts that I mentioned earlier. Note that free cash flow excludes equity investments our green energy portfolio, but including our investment in Comscore in March, which was which is traded up very nicely. This year, we expect to return to a more normalized level of free cash flow conversion in the range of 45% to 55%. Recall, we generated substantial working capital improvements in the first half of twenty twenty I'm pulling back on offered installment payments, which reduced accounts receivable and strategic sourcing, which increased accounts payable. These items are now on our base and will not serve as a source of working capital this year. Looking at our debt profile, on March 31, we had $75,000,000 drawn under our QVC revolver approximately $2,850,000,000 of capacity. We had $739,000,000 of cash and cash equivalents And our leverage ratio as defined in the QVC revolving credit facility was 1.9 times. We continue to return capital to shareholders through share repurchases. And from January 1 through April 30 this year, We repurchased 5,000,000 shares for a total cost of $61,000,000 In closing, our performance demonstrates competitive advantage of our business model. We are operating at the inflection point of accelerated online shopping, Wide adoption of video streaming and growing customer engagement on digital platforms. Business results reflect the progress we made Through years of strategic investment to capitalize on these trends and position us as a leader in video, digital, mobile and social commerce. We remain confident in our ability to sustain future growth and cash flow generation. We appreciate your continued interest in Qurate Retail And hope you all stay safe and healthy. I'll now open the call up for questions and turn it back over to the operator. Thank you very much, sir. We'll now move to our first question over the phone, which comes from Jason Haas from Bank of America. Please go ahead. Your line is now open. Good morning. Thanks for taking my questions and congrats on the strong quarter. So Mike, you talked about being pleased with what you're seeing With regards to new customer retention rates, I'm curious if you're seeing those retained customers begin to ramp up their spend, especially in Your fashion categories, which are I know are key for your best customers. And then does that give you confidence in your ability to lap the compares as they get tougher in the remainder of the year? Thanks, Jason. Appreciate your comments and question. We are seeing the new customers RASK is spending in ways that are pretty consistent with what we've seen in past years. And as you know, given the rebound in the fashion business, It gives sort of that much more opportunity for these new customers to engage with us in a broad way. And of course, you see a range of behavior, But we'll definitely see a comparable number of new customers move up the kind of spend ladder, Even getting all the way to the best customer spend within their 1st year. So very pleased with both the retention And kind of the ramp spend of those customers. We're not going to offer any forward looking guidance on the rest of the year, but I would reiterate what I said during my comments, which is We're very encouraged by consumer confidence. We're very encouraged by what's been a stronger than anticipated rebound in fashion. And so even though we're lapping these tough home content, I'm confident about how things look for the future. Thanks. That's great color. So as a follow-up, Jeff, I believe you mentioned, if I caught it right, that you're expecting OIBDA margins for QXH Should be flat in the remainder of the year. Is that the case each quarter? I think the compares get a little bit harder in the second half. So I'm just curious on how we should think about the cadence there? Yes. So as we look at my comments were really for the totality of the quantum of the rest of the year. From quarter to quarter, you'll have some fluctuation. But as I mentioned, just a number of different programs with respect to How category mix rebounds as we see more of a Some of the investments that we've made in network optimization turning more positive for us in the back half to offset some of the other pressures that we're having With respect to sort of near term fulfillment pressures around wage rates and freight rates. Thanks. That's helpful. And maybe last one, if I could squeeze one more in. Just on capital allocation, it looks Greg, do you want to take that? I was going to take it, Mike, but you can take a first shot and I'll be happy to chip in. No, sorry. I will turn it over to you. So, go ahead. That's great. Look, Over the last year, as you know, we've had 1 special dividend Of a preferred stock and 2 special cash dividends and we've increased the buyback from what was a low rate to a higher rate. The stock did move up Dramatically during the period and like most companies, we have a grid and sometimes when the stock moves during the period that means you buy less. We will continue to look at The high free cash flow generation we expect this year and how best to apply it, I think You should expect that we will be looking for a large payout as a percentage of that high free cash flow and how it what form it takes Whether it's another cash special cash dividend or whether it's increased buyback, we'll continue to evaluate. We'll now move to our next question, which will come from Oliver Wintermantel from Evercore. Please go ahead. Your line is now open. Yes, thanks and good morning. Mike, when I heard your comments, it sounds like you don't expect that Your strong performance was really just driven by the pandemic and the nesting trends. So for the rest of the year then, should we look at 2 year trends or 2 year stacks to be relatively flat in sales? Or do you expect that Good morning, Ali. Again, I'm not going to shy away from any Concrete guidance for the rest of the year as is our normal practice. So again, I can't add much more color other than to say Encouraged by the performance of the business, encouraged by the strong level of consumer confidence, encouraged by this Yes. Reemergence of fashion. And also just encouraged by this much larger installed customer base that we have You're into the pandemic and that, as I mentioned in my comments, that behavior we're seeing from her to come back. Those that required last year are coming back this year. They're spending at historically traditional rates. So we do think do think we have a lot working in our favor. We certainly recognize the steep comps, especially in the home categories, and we won't put an aggregate number on our expectations. But Net net, we feel good about the consumer. We feel good about the installed customer base. We feel good about the strategic programs we've put in place to find more and more ways to reach consumers and surround her with high quality Content, we like the diversity of our merchandising mix and we're charging forward. Got it. Thank you. And then Mike, one more. You mentioned on the in your prepared remarks that you're seeing some Inflationary pressure and some supply issues and I saw inventory was down this quarter. Maybe if you could give us a little bit more details, What you're seeing out there in inflation and supply issues and how you think you're going to navigate this year, for example, in inflation? Are you Trying to put prices through to the end customers. Thank you. Yes. We're definitely seeing as all retailers are various The mentions of, I would say, cost inflation by 3 big categories. 1 that we've talked a lot about and Jeff mentioned is Just higher freight rates as the demand for both inbound freight and outbound freight exceeds the supply and prices tend to rise when that happens. So we're paying more for freight. You're certainly seeing wage pressure and We're trying to make we're committed to being market competitive with our team members on wage rates and our fulfillment centers. And so There's some pressure there. And then there's just cost pressure from product shortage And how that drives up costs. So yes, we're seeing inflation. But as you could see in our results, We've been able to overcome those inflationary pressures and we think the whole industry is acting in a highly disciplined way, trying to manage Through these various challenges, trying not to get overly promotional. And In some cases, we have had past pricing through and our Cornerstone business as an example, What are the freight increases that are the most impactful given just the bulky size of those products? You definitely have to pass some on to the We're trying to do that in a judicious way. We're trying to stay disciplined on promotions. And so we think we're able to Kind of outrun those inflationary pressures with the offsets that Jeff talked about and that's why we're Projecting relatively stable or the rates, but within that is some built in inflation, some recovery of that, but then some other good programs To offset, so that we can stay neutral in the aggregate. All right. Thanks very much and good luck. Thank you. Our next question now comes from Ed Yruma from KeyBanc Markets, please go ahead. Your line is now open. Hey, good morning. Thanks for taking the questions. I guess first, very helpful slide deck. There's a I think I noted there was a 200 basis point difference in apparel penetration versus Q1 of 'twenty, but maybe just provide some more historical context. If we look at where Apparel is as a percent of mixed strength kind of peak of cycle. Where is it versus what? If you look at Apparel, it had been relatively flattish to slightly down in the couple of years preceding the pandemic. So we're probably a few 100 basis points off of peak, and we do believe still room to recapture Sure. A lot of share and mix in apparel. In terms of the margin rate, It certainly comes with a higher margin rate and we think that will be one of the positives that Jeff mentioned to Kind of rest of year, or a bit of rate. But I would note that it also comes with a higher return rate. So To some degree product margin rate and return rate tend to offset each other to some degree. So you'll get some Mix related benefit and product margins, expect to see as a higher level of returns that just comes with the category. That's part of why we have a higher product margin rate in apparel. So, one way of saying 300 to 400 basis points at least of Mix below peak and Windegro and some modest mix benefit that comes with that. Got it. And maybe a bigger picture question. Certainly, you likely benefited or you have during COVID with your new customers, right? She was at home, Maybe turn on queue for the first time in some period of time. As she starts to venture out and engage in more activity out of the home, how do you kind of surround this New consumer, new customer with compelling content wherever she's traveling. So that consumer Is we're just simply at a different threshold of engagement in online shopping and social streaming and video streaming That's not going away, right? So when that new customer is visiting YouTube, not associated with our business, but just engaging in YouTube. If we have something that's going to be of interest to whatever she's engaging with YouTube, we're going to present that to her in a really compelling platform. She's a much younger consumer. She's going to rediscover us on TikTok With fun 15 to 32nd videos created by the TikTok creator community, We're going to go back to her with great, which is a certain demographic, maybe great actual physical catalogs of Our gourmet food offerings, but we just as you know, we believe in serendipitous discovery fueled by our push. So we want to push our platform in front of her on whatever digital medium she's engaged in, In a way that's relevant to how she's engaging on that digital medium and having really nice success getting her then to kind of come back For those additional purchases. And as you know, it only takes a few purchases to lock someone into being a customer for life. So if we can get that 2nd and third purchase, we know we're in great shape for the long term. Thanks so much. We'll now move to our next question over the phone, which comes from Oliver Chen from Cowen. Mike, regarding live streaming and The thoughts around fragmentation, what do you see happening over time and how will iQurate be prepared to be competitive there? I would also love your thoughts on content and how content has evolved and which changes will be more sticky in terms of What the customer likes in terms of the creative and content and engagement factors as you think about innovation there as well. Great. Thanks, Oliver. A couple of thoughts. At the highest level, I think we've got to be in Constant test, learn, innovate mode because this ecosystem is going to continue to evolve in ways that are hard to predict. I don't know that we ever see kind of really substantial consolidation like there is in China where you can have 1 or 2 big platforms that just dominate Live stream shopping. I just think you're seeing a consumer that is engaging across every social platform depending on the And this almost infinite variety of ways consumers are accepting live TV, Whether it's a digital skinny bundle or Roku device or directly through their Samsung Smart TV, I just think you see this explosion of ways in which consumers access content in both a sort of lean back linear mode And in a lean in interactive and navigation mode. And so we're trying to win on both sides. Well, she's in a lean back mode to consume TV content or live stream content, we want to be there. Well, she's in a lean in mode, Whether that's engagement on a social platform or navigating our streaming app, which is a highly interactive app, We just want to be there and try to understand what behaviors she wants to demonstrate and what she's most interested in. And I think we'll just continue To learn as we go, on your on the second part of the question about content, again, a great time of discovery. And I think it's not widely understood just how big our competitive advantage is in content because the amount of content we produce, Our experience base and content creation resources at our disposal globally are just overwhelming. And the thing we've learned Is that these live streaming platforms are content based and to be able to have great high quality content that's Fresh every day, so she wants to come back every day is this huge barrier that others are finding. And so we're just going to continue to Test and learn what's striking to us is that the diversity of content that works. So everything from a 30 minute world And cooks great dishes and we help discover culinary innovation around the world. That's a fun 30 minute show. No selling involved, but brings people into our screening app and gets them engaged in it. 2, on the other end of the spectrum, How do you engage someone in a 6 or 15 second interval on TikTok? It's really kind of all of the above. And I think too early I'd say what would be most common other than I think there'll be a variety. I think it'll be extensive. And I think we've got the scale and resources Thanks, Mike. And on sustainability and tracking? Yes. Our view is we've got to take out really comprehensive approach because different kind of your question, different stakeholders have different areas of focus. And what's most important is that we do right for ourselves that we as a Qurate team are proud of the way in which We're engaging in the world around us. So, one of the things that are important, I think they're really embedded. I would encourage you to read our Corporate social responsibility report and also the commitments we've published because they kind of reflect what we think is most important. But in the Protecting the planet category, we're focused on obvious issues around emissions, recyclability, how do we really drive our customers to Recycle, yes, so just sort of reducing waste and emissions throughout them along those lines. And then around product sourcing, I think that's a critically important area. So really trying to make sure that we're doing all we can Around where we source product, who we source from, use of different fibers and materials to reflect what the society cares about today. And then finally, on our pillar around empowerment, we want to create thriving communities and thriving communities to us are diverse communities, who have set goals for for diverse representation in our leadership ranks. We've set goals for ourselves about how to create a thriving So balancing the media mix and thinking about new versus existing engagement. Thank you. Oliver, it's a great question because as our marketing teams are looking at sort of the duality of Continue to attract and expand the spend with new customers and how do you continue to Reach them across a number of different platforms and where we believe that we will get the appropriate returns. So we're definitely leaning in there. But yet also as Mike had mentioned with the opportunity to reengage and expand and revitalize our experience with our Avids and Elites, who have a much larger purchasing Velocity and something that we believe is the opportunity to continue Through personalization and through the opportunity to have some push notifications, if you will, recognizing her and the other Platforms in which she is engaged is some of the areas that we're looking at really leaning into and quite honestly, we're getting some great results from it. We'll now move on to our next question over the phone, which comes from Michael Coppola from JPMorgan. Please go ahead. Your line is open. Good morning and thank you for taking my question. The slides you guys provided on, I believe this is Page 6 that shows the category performance for QXH was very helpful. I was curious if you guys had thought about how what categories are shifting As the United States reopens and even if you could provide color sequentially throughout Q1, what categories kind of came back month to month as well? Thank you. Yes, sure. I'll take that. So the home category, as you can see from the numbers, kind of maintained strength Through the quarter, as we started to lap much steeper home growth in March, on a relative basis, it started to soften As you would expect, continued broad based strength in home, that will now start to lap As we get into much deeper comparison in home. Electronics has been a more up and down category through the pandemic and we suspect That's what it will look like through the rest of the year. But as we point towards Q4 and the critical holiday season, Given that we suffered from substantial consumer electronics shortages last Q4, we actually think there's room there that could be very compelling to get that business back to healthy growth. So it's an area that we actually have an easier compare just because the supply shortages we shared with you on our last call. Accessories has been pretty strong For a few quarters and we see that business continuing to be strong. And we think it will get healthier as it moves away from A few categories like loungewear, non leather handbags and active footwear into a broader range of categories. As As the consumer starts to go out more, maybe wants a leather handbag, starts to want to get out new footwear. Apparel is the big story. Apparel has been substantially negative. It returned to strong growth in March. We were pleased with strength of the rebound across multiple categories in apparel and we look to apparel to be a big grower The rest of the year, beauty is growing across most categories as Jeff shared. The one category that isn't growing is color cosmetics, I don't think will grow until we get past wearing masks. So that's a wildcard. I think there's real upside For us in beauty, we just can't quite predict exactly when that color cosmetics business will rebound, but it's fallen off so substantially over the last year But I think we'll hit a point of pent up demand in color cosmetics and we're confident that the other aspects of beauty will stay strong. And then finally, we don't talk about it very much, but jewelry, which has been a difficult business for us, we've purposely downsized it over the last few years. It was basically flat in the Q1 of this year, which is substantially better than historic trend. We think we found a good formula That's working for us and so we think we can get that business stabilized and even potentially growing as we move Through the year. So kind of excited about the range of categories that are performing and the optionality that gives us as we go forward. Great. That's very helpful. I appreciate it. And just as a last one for me. I know you guys mentioned in the press release that you sold, I believe it was The Westchester Corporate Campus as well as the distribution facility for $40,000,000 should we be thinking of those as one time in nature or if there's any plans for further asset sales? And that's all for me. Thank you. Thanks. Jeff, you want to take that? Yes. So just to be We actually had 2 separate corporate campuses, if you will, in Westchester. It was the second Location that we actually consolidated. As we continue to look at our sort of hybrid Ways of working going forward, understanding what our customer or our team member needs are to be either on-site or remote. We believe that there will be continued opportunity for us to take a look at our office space. To the extent that we will be able to reduce that office space, We will look to do so. We do have some other facilities in which, from a customer Service perspective, we actually closed last year and those customer service individuals are working from home permanently. Thanks. And our last question now comes from William Brewster from Solimar Capital Group. Please go ahead. Your line is now open. Hey, guys. How are you doing? Mike, nice to see The business continuing to execute and with your announced departure coming up in the not too distant future, it's Nice to see everything coming together that I know that you've worked really hard to make sure It's working as a well oiled machine. I was curious on that note, what looking back in the past, The ATSN integration, I think, caused some issues within the organization. I was hoping that maybe you could talk about What maybe we should expect from a succession planning? And if you're willing to talk a little bit about Leslie's role in the organization and just kind of how you all are thinking about making sure that there's no hiccups As you get ready to depart, it would be great. Thanks so much for the comment and question. We do feel really good about where the business is performing now and it's not due to me, it's really due to a terrific leadership team and How to engage team members and just I think years of hard labor, including as you noted, It's challenging integration just because these integrations usually are challenging. And we made a number of changes in HSN business and We've brought teams together in different ways. It always takes longer to get through those things than probably we estimate. And so maybe we were a little overly optimistic At the speed with which we could get through those complicated changes. But we now look at an organization that is Fairly stable, when it comes of through with the big parts of integration, just a terrific Senior leadership team with a number of very strong recent additions, including Leslie. So really like the stability of the senior leader, A team in deep level of experience along with some talented new folks. And we have a really clear strategic focus, which is why we keep coming back I recall on reiterating what those strategic priorities are. We know where we're headed, a lot to do for sure, but feel really good about where we're headed. So I think that enables us to get to the succession process very well, which is why I picked this timing. I wanted I didn't want to depart before I thought we were in a position of stability, momentum and a strong leader team. And You mentioned Leslie, she plays a critical role because she oversees and she's in effectively a newly created role when she joined us Overseeing all of QVC and HSN in the U. S, which was definitely a sort of a gap in our organization. So we've got a very talented leader team across GBC and H is down and she's been able to bring that team together and really help us lean into these strategic priorities that I get to talk about them, It's really Leslie and her team that have driven these strategic initiatives that are giving us the kinds of results we're So Nedmet, we feel good that we'll have a good and effective transition and we'll be able to Maintain the momentum and the new leadership team will undoubtedly take the company much farther than I have and that's Something that I'm excited about. And I know that was our last question and we're a little bit long, so we'll leave it there. Thank All of you for your time and interest. Stay well and look forward to talking to you on the next call. Thanks everyone. Ladies and gentlemen, this does conclude today's call. Thank you very much for your participation. You may now disconnect.