QVC, HSN to combine operations into new business unit

QVC and Home Shopping Network are combining their business units in a move that will result in the elimination of about 2,075 jobs.

Parent company Qurate Retail Group announced that its HSN and QVC US business units are being combined to form a new business unit that will be called QXH. The move is designed to enhance long-term growth and synergies and better leverage the combined scale and resources of the two organizations, according to Qurate. The two brands will still maintain their own identity.

The initiative will streamline operations, mostly at HSN, with the aim of creating a leaner, and more agile organization. Approximately 350 positions will be eliminated by year-end 2018, the majority at HSN's St. Petersburg, Fla., campus and Long Island, N.Y., operations. (HSN was purchased by Qurate for $2.6 billion in July 2017.)

In other changes, the HSN and QVC US fulfillment networks will be combined to enhance delivery speed and lower costs to serve customers. The first phase includes opening a new fulfillment center in Bethlehem, Pa., in 2019, as well as anticipated closures of three fulfillment centers ( Lancaster, Pa., Roanoke, Va., and Greeneville, Tenn.) in 2020. Approximately 1,725 positions will be eliminated in the centers upon closure, which will be partially offset by the anticipated hiring of 1,200 to 1,500 positions at the new Bethlehem facility.

Additionally, Qurate will evolve toward a leased vs. owned model for many of its fulfillment facilities, to increase flexibility and reduce longer term capital requirements.

"As the world's leader in social, digital and video commerce, Qurate Retail Group is committed to extending our leadership in a rapidly changing retail market and attracting the next generation of consumers by bringing compelling product discoveries to market every day, creating seamless customer experiences, and developing highly engaging digital and social shopping platforms," said Mike George, president and CEO, Qurate Retail. "The changes announced today will enable us to accelerate this transformation by better leveraging the considerable scale and resources of our HSN and QVC US businesses."

Taken together, HSN and QVC US generated $8.5 billion in revenue in 2017, reached 100 million homes through five broadcast networks, attracted more than 1 billion visits to its websites, and shipped over 170 million items.

Qurate detailed the expected benefits from the combination, which include enhanced product discovery and optimization of product offerings across broadcast networks and digital and social platforms, improved delivery times and package consolidation, and greater cost synergies from the HSNi acquisition.

The changes are expected to deliver an additional $120 million to $125 million in cost savings, added on to the $200 million to $220 million of estimated run-rate operating synergies from the HSN acquisition which Qurate identified at its May investor day. This brings the estimated total to between $320 million to $345 million by 2022.

Mary Campbell, chief merchandising officer, Qurate and chief commerce officer, QVC US, will be responsible for QXH merchandising, marketing, brand, and digital strategy and the QVC US digital, content, and broadcast operations. She will have primary responsibility for the development and growth of the QVC brand.

As part of the changes, the QVC US president role is being eliminated, and Steve Hofmann, who currently holds the position, is leaving, effective Friday.

Additionally, the HSN and QVC US buying organizations are being combined and structured around seven strategic category groups: Apparel, Accessories and Jewelry, Beauty, Kitchen Electronics and Cookware, Home Innovations, Home Style, and Consumer Electronics. Category leaders will be responsible for developing and driving strategies to maximize growth in the US market, across both the QVC and HSN platforms.