Liberty Interactive Corp. reported that earnings plunged at its non-QVC e-commerce businesses, which include Backcountry.com and Bodybuilding.com, in the second quarter due in part to higher spending on paid search as a percentage of revenue and increased promotional activity to move seasonal inventory carried over from last winter.
LINTA said adjusted OIBDA for those businesses fell 36 percent to $23 million for the quarter despite a 13 percent increase in sales, which reached $391 million in the quarter. Operating income for those e-commerce businesses swung from $19 million to a loss of $1 million.
“We had some hiccups in the second quarter, with negative impacts occurring at most of our e-commerce businesses,” said Christopher Shean, SVP and CFO, referring to “hopefully nonrecurring items,” such as legal settlements and a compensation arrangement put in place to reduce turnover at an unidentified e-commerce subsidiary. The rest of the decline was due to operating decisions to increase spending and paid search as a percentage of revenue, and to be more promotional to move out seasonal inventory, including winter goods.
“That clearly hurt the business and we were forced to liquidate more inventory than normal in the first half of this year,” said QVC President Mike George in reference to last winter, which went down as the warmest in more than a century in the United States. “How much of that is one time, we’ll leave you to judge, but we’re hoping it’s not an indicative winter.”
Also hurting OIBDA was rapid growth in the mobile channel. In the United States, sales via smartphones and tablets rose 160 percent in the quarter and now accounts for 18 percent of e-commerce sales. Sales from existing customers were up 4 percent while sales from new customers were down 5 percent, due largely to softer home electronics sales.
