Liberty TripAdvisor Holdings, Inc.
Q2 2016 Earnings Call Transcript

Published: 5 Aug 2016

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Interactive Corporation 2016 Second Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded August 5, 2016. I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead.

[Courtnee Chun:]

Thank you. Before we begin, we would like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, stock repurchases, future financial performance, market conditions, sales demand, international and regulatory matters, the expected benefits and synergies resulting from the acquisition of zulily, the implementation of new marketing and fulfillment processes at zulily, new service and product launches, the proposed split-off of Liberty Expedia Holdings, and the matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products or services, the satisfaction of conditions to these proposed split-offs, market conditions conducive to repurchases, the availability of acquisition opportunities, competitive issues, regulatory issues, and continued access to capital on terms acceptable to Liberty Interactive. These forward-looking statements speak only as of the date of this call, and Liberty Interactive expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any changes in Liberty Interactive's expectations with regard thereto or any change in events, conditions or circumstances any such statement is based. On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA, adjusted net income and constant currency. The required definitions and reconciliations, preliminary notes and schedules 1 through 5 can be found at the end of the earnings press release issued today, which is available on our website. This call also may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty TripAdvisor Holdings. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These forward-looking statements speak only as of the date of this call and Liberty TripAdvisor Holdings expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty TripAdvisor Holdings’ expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Now, I'd like to introduce Greg Maffei, Liberty Interactive President and CEO.

[Greg Maffei:]

Thank you, Courtnee. Good morning to all of you out there. Today, speaking on the call, we will have, besides myself, Liberty Interactive's CFO, Chris Shean; QVC's President and CEO, Mike George; and the President and CEO of zulily, Darrell Cavens. During the Q&A portion of the call, we will also be able to answer questions about Liberty TripAdvisor Holdings. So on to some of the highlights. QVC had a solid quarter but saw softening of results toward the end of the quarter, Mike will discuss those in more detail. U.S. revenue grew 2% and adjusted OIBDA grew 4% in the quarter. On a consolidated basis, revenue was up 3%, adjusted OIBDA was up 4%, excluding the startup cost on our new French venture. In the second quarter, consolidated mobile penetration was 58% of QVC.com orders, and in the U.S. mobile penetration was 57%. On a very positive note, zulily posted outstanding results with revenue up 23%, adjusted OIBDA up 121%; orders from the repeat customers were up 92% and adjusted OIBDA margins increased to 8% of net sales up from 5% a year ago. During the quarter or actually the period May 1 to July 31, we repurchased $146 million of QVCA shares. There was a high level of activity also at Liberty Ventures. We closed finally on our investment in Liberty Broadband we are up over $300 million already on that deal. And we completed the spin-off of CommerceHub on July 22. Frank Poor [ph] and his team did a great job meeting with investors, analysts pre-spin. There are still some important numbers that have kind of come out as we report earnings at the end of the quarter due to the lawyers and the limitations on our disclosure. But I think you’ll see as we’ve long extolled the virtues of this exciting business model, with the margins, that the story is only going to get better and better. And at these levels, we think the stock is pretty inexpensive. We also saw continued progress on the split-off of Liberty Expedia and re-filed the S-4 on July 19. Looking for a moment at Liberty TripAdvisor, we saw the continued implementation of Instant Book. Second quarter was the first quarter where we rolled out Instant Book in substantially all the major markets for the full quarter. We are seeing strong indicators for Instant Book including increased conversion, repeat customers and the number of stored credit cards. Viator, looking at the attractions space also had bookable products up over 45% since the beginning of the year so we’re seeing good traction in that space. The shift to Instant Book, which we view is entirely necessary is putting near-term pressure on revenue growth and profit margins but we still believe it is the right long-term path for TripAdvisor and remain excited about the progress there. With that, let me turn it over to Chris Shean to discuss the financials for Liberty Interactive.

[Chris Shean:]

Thanks Greg. Taking a quick look at the liquidity picture, at the end of the quarter the QVC Group had attributed cash and liquid investments of $394 million and $6.4 billion in principal amount of attributed debt. QVC's total debt to adjusted OIBDA ratio as of June 30, as is defined in its credit agreement, was approximately 2.59 times. This ratio now includes zulily’s adjusted OIBDA as part of the refinancing that we announced in June. Now, I'll hand the call over to Mike for additional comments on QVC.

[Mike George:]

Thank you, Chris. In Q2 we achieved solid results in a challenging environment. Looking at our consolidated results for the quarter on a constant currency basis, revenue increased 2% and excluding France, adjusted OIBDA grew 3% and adjusted OIBDA margin expanded 14 basis points. In the U.S., we grew sales and expanded adjusted OIBDA margins although we did experience a deceleration in demand late in the quarter. Our international business generated strong revenue growth and strengthened considerably from Q1, and zulily continued its outstanding performance of growing revenue in excess of 20% and more than doubling adjusted OIBDA. As we discussed on last quarter’s call and detailed on our press release today, in Q1, we began allocating certain fixed cost for management reporting purposes differently. And remainder of my comments, all describe year-over-year results excluding the impact of the new allocations which we believe will provide a more accurate understanding of underlying performance. Our U.S. business grew revenue 2% in the quarter reflecting 4% volume growth and a reduction in return rates, partially offset by lower average selling prices. Our adjusted OIBDA increased 2% excluding the allocation change and OIBDA margin expanded 11 basis points due to lower fixed cost, higher credit card income and favorable inventory obsolescence partially offset by higher bad debt and higher freight expenses. We experienced strong growth in fashion, particularly in our proprietary brand such as LOGO, Isaac Mizrahi, Susan Graver and [indiscernible] Company. Our household and garden categories also performed strongly with impressive results from home security and fitness. In home décor we saw strong performance from Northern Knights strategy and Select Comfort and Serta mattresses. These gains were partially offset by continued underperformance in jewelry and consumer electronics and softening results in Kitchen Cook. Although, even in challenged categories, when we can bring the customers something new at a compelling value, she responds. We were especially encouraged by the outstanding results of our Amazon Echo TSV, which sold 50,000 units. We were able to effectively explain this new technology to our customers and offer her a better price than Amazon, highlighting the complementary nature of our two businesses. In Jewelry, we were pleased with the launch of Stella & Dot, and we began to build the My Saint

[Darrell Cavens:]

Thank you, Mike. And thanks everybody for joining today’s call. I’m pleased with our second quarter performance and our team’s great execution so far this year. Second quarter revenue came in at $366 million up 23% year-over-year and adjusted OIBDA came in at $31 million, up 121% year-over-year. Over the last year, we’ve successfully focused on the core of our zulily brand offering by delivering something special and incredible value every day. We have improved our customer experience with strong operational execution that has helped to drive accelerating growth over the last four quarters. Before I share the second quarter results, I want to provide an update on our efforts with QVC. As Mike said, we gained strong traction working together particularly in merchandizing and technology. We’ve leveraged QVC’s vast vendor network and to date we’ve successfully launched over 70 QVC brands to zulily customers ranging across beauty, apparel and home category including brands like Denim & Co., [indiscernible] Beauty. QVC’s long-standing and in many cases proprietary relationships have allowed us to offer a highly differentiated unique brand add great value to our customer. As we had expected, our collaboration with QVC is allowing us to move fast and deepen our brand portfolio as we continue to keep our customer experience fresh every day. Our teams have numerous other initiatives underway across technology, marketing and operations, which we believe will contribute to incremental and profitable growth for the QVC Group over time. For example, we’re collaborating on additional image optimization tests for this year that we believe will help QVC drive greater conversion on their e-commerce platform. We’ve also had ongoing discussions with the QVC international teams, learning what their global business is, which we think opens up a significant new opportunity to grow our business in existing and new markets for both companies. As a reminder, today only 6% of our sales are from international customers. And I’m excited to continue building on our long-term collaboration and sharing updates with you over time. Now, moving on to the core business. Today I’ll cover three key areas, marketing; then our customer experience; and lastly on profitability and our long-term opportunities. First on marketing. As we’ve improved our customer experience through shorter ship-times, great products and innovative site experience, we’ve continued to see the quality of new customers improve and our existing customer repeat rates grow year-over-year. Last year we made a strategic shift in the broad-based marketing channels with a focus on acquiring customers with higher lifetime value. We continue to see strong operational execution across the rest of the business. We believe we have much more opportunity to ramp up our new customer base. Going into the second half of 2016, we’ll continue to lean in the marketing to drive quality new customer acquisition which is critical to driving demand long-term. Some examples, this week, we launched our new TV Creative Campaign, featuring a behind-the-scenes look at zulily that highlights the fresh and unique curetted story we tell about our differentiated brands and boutique events every day. In mid-July, we also kicked off our back-to-school campaign, which highlights zulily’s expertise and back-to-school of trendsetting across traditional online ads, PR and social channels. I’m excited and eager to build our brand and market presence and believe we have a massive opportunity well beyond the 5 million active customers we have today. Second, we continue to innovate on our daily site experience to bring our customers back to us again and again. We’ve invested a considerable amount of effort over the last year across merchandizing, marketing, technology and operations and we’re seeing the benefit of these investments through improved customer retention rates and spend per customer. Q2 orders from repeat customers increased to 92% up from 88% a year ago and up from 90% in Q1. In Q2, we also ramped up a number of new urgency drivers, which have helped drive frequency of engagement. For example, inspired by QVC’s TSV, we’ve been spotlighting a Deal of the Day or One-Day Sale instead of our typical 72-hour event. With the expansion of our vendor fulfillment services and consignment programs over time, we’ve also continued to increase the volume of events that feature products that can ship in one to two days without taking on additional inventory risk. Our investment in technology over the last year has allowed us to continue to test and change the cadence of these urgency drivers while also leveraging our variable cost over time. Lastly, we continue to see significant growth in our profitability primarily from our strong cost discipline and gains from our long-term investments in supply-chain and technology, which are driving efficiency with scale. Our adjusted OIBDA margin expanded from 5% to 8% as a percentage of net sales year-over-year. Our gross margin expanded from 29% to 30% year-over-year primarily from strong supply chain execution. Our SG&A cost decreased as a percent of net revenue due to our leverage of scale. As we look to the second half of 2016, we’ll continue to focus on driving growth and profitability. I remain incredibly excited about the growth we’ve seen to date and look forward to continue building on that momentum for the remainder of 2016 and beyond. I look forward to updating you again next quarter. With that, let me turn the call back over to Mike.

[Mike George:]

Thanks Darrell. Let’s take a quick look at the liquidity picture over at Liberty Ventures Group. At the end of the quarter, the Group had attributed cash and liquid investments of $116 million and $1.8 billion in principle amount of attributed debt. The value of the public equity method securities and other public holdings attributed to the group was $5.6 billion and $1.7 billion respectively at the end of the quarter. We did have quite a bit of activity at Liberty Ventures post quarter-end these are detailed in our press release. Now I’ll hand it back over to Greg.

[Greg Maffei:]

Great. Thank you, Mike, Darrell and Chris. To the audience, we appreciate your continued interest in Liberty Interactive. With that I’d like to open the call for questions. Operator?

[Operator:]

[Operator Instructions]. And our first question comes from the line of James Ratcliffe with Buckingham Research Group.

[James Ratcliffe:]

Hi, thanks for taking the question. On Ventures with CommerceHub done and Expedia coming presumably reasonably soon, how do we think about the plan for Ventures going forward and it’s going to be dominated by in terms of the asset mix via the broadband and charter stakes. Does it make sense to try to collapse that structure and just thinking about the other assets, I know as you have reclassified. If Interval is available for sale, how much of the rest of it is liquidate-able and if you did go down that route, what would you think about using the cash for? Thanks.

[Greg Maffei:]

Thank you, James. I don’t think we have a permanent announced plan in our minds, perhaps typical Liberty will look at it as it goes. I’m and I think we are all very bullish on our investment at Liberty Broadband. We’re up nicely in the few months we’ve had it. But we remain quite optimistic on the growth at Charter and therefore Liberty Broadband. And as you can see perhaps by the recent contract that Tom Replidge [ph] undertook which has options that are granted all the way up into the 500, so he’s quite bullish on it as well. So, I think we’re holders of that stock. We have no plans. And obviously as it grows and it’s a source of liquidity, we’ll look also for other investments that are attractive, none to announce today. But look at the environment where things are moving around and we are always on the prowl.

[James Ratcliffe:]

Okay, thank you.

[Operator:]

All right, thank you. And our next question comes from the line of Barton Crockett with FBR Capital Markets.

[Barton Crockett:]

Okay, so I wanted to focus in on the QVC issue here which is more like pretty dramatic in the history of QVC. I hear the argument that change was maybe a lot of factors, TV, consumer, your Qcard potentially and an issue with the supplier. But the thing that’s curious is that while the consumer environment is a little bit choppy, it hasn’t kind of turned so rapidly South that anyone else that I can point to in the part of June and going into July. So, I was wondering if you could respond to the question of why would, you guys see a change in consumer center that perhaps more than we’ve seen elsewhere. And also maybe if you can quantify how much of the kind of downturn is maybe changed to your change with Qcard and from the issue with. I think one, merchant or supplier that you’ve called out.

[Mike George:]

Thanks Barton. I’m trying to frame it in a couple of ways. So, zero point, this is very unusual swinging trend for QVC and we’ve really not seeing this kind of swing before outside of couple of quarters round the great recession timing in ‘08 or early ‘09. We pride ourselves on the stability of the business we’ve pride ourselves now being able to achieve positive growth in partially all environments. So this is an unusually big swing in it. But I would want it to be very forthright about acknowledging it and kind of break in precedent in terms of updating you on the trend at quarter to date. And certainly when we saw our sales software as and as quickly as they did we began to try to find, what did we break or what was the sort of one-big change that happened. And we really can’t find anything in our data and experience to suggest that there is any one thing to point to. So, it really feels to us that its unusually difficult confluence of events that we think will broke our way out of, as know but we don’t I think it’s any kind of new normal by any means. But this unusual combinations and is it part of what we’re seeing is, we’ve acknowledged now for quite a while but we’ve had a I think. But we’ve had a couple of fairly tough businesses and consumer electronics and jewelry and haven’t been as successful as we would have hoped to - getting those businesses moving. We’ve had a couple of unusually strong businesses really dynamic businesses and apparel and accessories and then kind of in between sort of solid results in areas home and beauty. So I think we just hit a combination of factors. I think in those businesses that have been performing in a very good stable way in home and beauty, we’ve seen a few big items that aren’t, in a couple of categories like kitchen electrics, some new items are getting, some items are getting little bit stale, we’re waiting on a little more innovation in the industry that’s created more pressure in those businesses. We had this one big supplier issuer that I mentioned that put some pressure on those businesses. And then, where we saw the biggest drop was clearly in fashion which had been the thing that was really propelling our business. And while it’s hard to point to why that business would fall off from such a strong trend, I do keep coming back to the view that we are at the end of a long-season with this extraordinary level of mark-down activity in department stores is best we can tell, department stores of course haven’t reported yet. But just from our own observations, the nature of the discounts and coupon and going on. And so, we think our customers kind of feels like, she’s kind of taking a bit of a timeout. And maybe shifting some purchases to this mark-down activity or maybe just sort of holding. And when we’ve done kind of pre-fall season fall events, we’ve actually been pretty pleased with results. And today actually coincidentally marks the official launch of our fall season, with a big fashion event that knock-on-wood is slightly above plan today, so a day doesn’t make a year. But I think we’ve got to get into the new season and really figure out what our normalized trend is. So, one way of saying, I think a variety of different events affecting different businesses combined with the fact that our greatest area of strength happens to be which is fashion, it happens to be the area I think under most pressure in retail right now at the end of a tough season. So, we got to see that happen, we got to see that we can grow out of this. But I think that’s where we are today. And then with a little bit of caution there, turn it around that kind of trend in August as we move into couple of weeks of heavy Olympic viewership. Maybe we’ll be able to turn it around more quickly but we wanted to acknowledge caution as we kind of finish out the summer months. Qcard and if you’re, I’m not sure I understood the end of your question. If you’re referring to the change in Easy-Pay practices where we’ve been a little more conservative on Easy-Pay, that pie has some impact. But I don’t think that’s, I think that’s likely to be a huge driver. But it could be one of sort of five or six contributing factors possible.

[Barton Crockett:]

And I guess what’s Qcard, I mean the fact that there is little bit more credit pressure here. Is that customer not spending like they were because maybe they’re feeling more constraint, as there something I that customer base that is potentially an issue.

[Mike George:]

I would say what we see in general is that, where are we seeing the sort of the biggest follow-off in sales is with our most valued customers. These are sort of the best of the best, customers have pulled back somewhat. Now, I caution that that means a customer that might have been making 15 or 20 purchases a month, might have pulled back one or two purchases. Right, so they’re highly, highly engaged with us but pulling back on the margin. Whether that’s she’s feeling financial pressure whether that’s because that’s the customer that spends the most on fashion and just kind of waiting for the new stock, so little bit hard to tell. We don’t see any correlation. We’ve looked at our kind of outstanding payments to us and to see if per level of out-sanding payments co-relates lies with any change in performance and we haven’t seen. So, it’s hard but we are concerned that right up-rates pumped up a bit. We’re not seeing an obvious linkage between that issue and the sales trend. And I guess the final point I’d make on that is, given that the sales shortfall is with our best customers, actually lower frequency customers have actually increased their purchases probably in the last couple of months, so it really is among that core customer. What gives us confidence that we’ll get through just fine and we actually have been doing some focus groups where we brought in our highest spending customers who had the biggest drop-off in sales. And the good news is according to those focus groups and I’ve been listening to a lot of them, the still love us. They don’t even, they aren’t even aware that they pulled back their spending. So, that’s why these things feel like they are bit of kind of moment in time event while dramatic still a kind of moment in time event that we should be able to push through.

[Barton Crockett:]

Okay. And just I mean, one final question on this because it is I think important for the equity. What makes you confident that this isn’t just partly at least or maybe to a large extent Amazon getting success and fashion and taking share not just from department stores but maybe from QVC.

[Mike George:]

And I guess, we try to conclude that for a few different reasons, to break questions. So, where 1 as you would expect in this kind of an environment in particular we’ve done a lot of surveying over the last several weeks of our customers to understand about, try to understand this change of behavior better to ask them where else they’re shopping. That survey data as imperfect as it is it’s all obviously sell reported but our customers are simply not reporting that they’re shopping at Amazon more. In fact the recent surveys we’ve done suggest they’re shopping there less. And what with too much in the data release at least it says to us but so we’re not top of mind for them. And the very fact that actually if you think about who, for the risk of losing sales to Amazon, intuitively you would believe that the less engaged lower frequency customer is going to be the first to go to Amazon. The last to go would be the core customer. And so, when you look at our sales softness over the last couple of months, that loan gate customers is actually doing more with QVC. And it’s that core of the core that’s doing a little bit less. And this would be very unusual for that customer to be the one interested in Amazon. And I guess, kind of the last piece of comfort I take in all o that I going back to these focus groups and not to too much talking to bunch of focus groups. But in those focus groups what really struck me is a we asked every customer where else they shop? We know our customers love shopping and they all talked about from Niemen’s to Macy’s to TJ Max to zulily, not a single customer unaided mentioned Amazon, not a single one. We them prompted Amazon and they said yes, we shop on Evans on to but now for QVC stuff we shop there for food cleaning supplies and so forth. So, again that’ highly imperfect data but we just can’t find anything in any of our metrics that would suggest that we’re losing in these fashion businesses to Amazon.

[Barton Crockett:]

Okay, that’s helpful color. Thank you very much.

[Greg Maffei:]

Next thank you.

[Operator:]

Okay, thank you. And our next question comes from the line of Alex Fuhrman with Craig-Hallum Group.

[Darrell Cavens:]

Great. Thank you very much for taking my question. Thinking about the kind of sudden drop-off, also curious if obviously zulily had a terrific quarter overall here. But wondering if perhaps they saw the same directional shift there in June, in July and perhaps more broadly thinking about all of the other retail and e-commerce properties that Liberty is involved with, is that something that you get the sense that sequentially it’s impacting other properties as well?

[Mike George:]

Darrell, do you want to take that?

[Darrell Cavens:]

Sure, yes. I mean I think as we said on the call, I think we’re pretty optimistic about the back-half of the year. I think we prescribed [ph] on a very kind of consistent, kind of strong growth through Q2 didn’t see kind of the same behavior that Mike expressed. We certainly have some harder comps as we come to the back half of the year that we’re kind of watching carefully and driving aggressively at but no we haven’t seen kind of that same behavior?

[Mike George:]

Let me jump in. It doesn’t have as many e-commerce properties but I don’t think we saw that bodybuilding something in that form or shape. Obviously a different kind of consumer then perhaps KBC has. Next question please.

[Operator:]

Thank you. Your next question comes from the line of Eric Sheridan, UBS.

[Eric Sheridan:]

Given the question, maybe just following up on one theme there and then also asking Greg a question. But on the theme of the sharper trends and what you saw Mike in the quarter. Maybe walk us through the decision you made and what you saw in consumption habits that you felt it was the right decision to sort of let the consumption habits fall off a little bit and not incent continued consumption whether it be the credit decision or incentives around shipping or discounting on pricing. Just so we could understand a little bit of how you sort of saw that evolve in the decision you made on sort of how it will ebb and flow through Q3. And then Greg, maybe for you, with QVC down as much as it is, does that change at all the thought process for an allocating capital behind the buyback for QVC and thinking through the leverage targets there? Thanks so much guys.

[Mike George:]

Okay, thanks Eric. So I’ll take the first part. It’s certainly something we look at carefully, we have this overwhelming buyers to avoid getting too promotional because it actually kind of pollutes the model over time, it trains the customer to have a certain set of expectations, it creates a buying remorse. And so, even when times are really tough we try to kind of steal ourselves to letting the sales hit their natural level and not getting too promotional. And we did actually, we did pull back on Easy-Pay in June. We did have in Q2 our first not only fully comped, the shipping and handling change, our first growth in shipment and handing revenue in a year. So, we didn’t, we chose not to engage in those promotional activities. That said, we do are sensitive to losing too much share in this environment. We want to make sure we stay relevant to our customer base. And we want to make sure that our inventory stays relatively clean. So we have done, we’ve been a little more active in clearance events than we historically would be. And we did a little more of that in July and then we’ll probably do a little more of that in August where we’ll be a little more aggressive on our discounting to kind of get the apparel and jewelry businesses in particular a little bit cleaner. That will put some downward pressure on our product margins. And then we’ll just kind of keep watching it. But sort of our general view is, getting reinforced by everything we’ve seen is, this customer loves us, she’s with us and let’s not make such major decisions that we start to really pollute the business. We just want to do those in a very measured way as we kind of move through this current sales pressure.

[Greg Maffei:]

So on capital allocation, well, just on capital allocation. Look I think we have been consistent with returns on capital. Obviously it’s a more attractively priced equity. We still have the lead from the company. We don’t necessarily set forth what we’re going to buy prior to buying it. And I would note we are somewhat constrained by the leverage targets we’ve given to rating agencies and alike. But with that all in mind, it is now obviously a more attractively priced equity that it was yesterday.

[Courtnee Chun:]

Next question please.

[Operator:]

Okay. Next question comes from the line of Tom Forte with Maxim.

[Tom Forte:]

Great, thanks for taking my questions. So, due to recap there is nothing in the results that suggests this is all related to Amazon or to cord cutting. And then by way of context can you tell us the last time QVP U.S. reported negative sales for the full quarter? And then two other quick ones. So, is it possible if you look back..

[Greg Maffei:]

No, no, you get to ask two questions, that’s it. You had your one question, is you want to hear about Amazon. Go ahead.

[Tom Forte:]

Okay. So, I’ll take those quickly. So we get on Amazon on the other side of the cord cutting, we’re not seeing any material erosion in, number of comps at access QVC and our viewership is actually good. So just, no - certainly no change in those metrics that would suggest any concern in the last couple of months?

[Greg Maffei:]

And you had a second question?

[Tom Forte:]

Yes, I do. So, since this is the quarter where you’re going to have the Olympic and then Election. And that could create some incremental noise, how should we think about historically how those items affected your sales? Thank you.

[Mike George:]

So, and I didn’t, I know you’d ask when was the last time we had negative sales, an answer to that is Q2 ‘06. So, other than the latest two quarters are laid in the first quarter s of ‘09 for obvious reasons where we will put a negative result. This business has been consistently positive and its well, we we’re showing disappointed with this trend in Q3. We absolutely view this as anomaly. Look Olympics, every four years it’s different, as a fact that it’s in same time-zone. And we’ll prepare forth perhaps some impact on viewership and sales that would be hard to quantify that, I don’t know that that means a worsening trend to what we’ve seen but it made me, it’s a little bit harder to get up and over this trend, at least over the next two weeks. Although even that can be counted by the fact that we’re now finally starting to launch our fashion goods. So, we’ve tried to do software counter programming against the Olympics. But it’s different CV impact. So the impact of the President Election, I don’t know that you could say that has a clear and systemic impact on QVC, to actually have it over such an extended period of time. I think this year has been a bit unusual for obvious reasons and I think there is little bit of this negative consumer sentiment about the presidential race that is having some impact. But I think that’s more diffused, I think the real issue is we just need to kind of get through the Olympics and see if we can kind of start the club access this trend.

[Greg Maffei:]

Great. Thank you operator. Another question?

[Operator:]

Thank you. And our last question comes from the line of Ed Yruma with Pacific Crest Securities.

[Ed Yruma:]

Hi, thanks for sneaking me in. So, I guess first question on apparel, were there any specific areas of apparel that were particularly weak or that the downtrend was particularly pronounced. And then I guess second, as you think about the credit business from a longer term perspective, how important is it to kind of drive a credit business to maintain top-line and what kind of metrics do you think about when you look at the profitability of credit business tied to your sales. Thank you.

[Mike George:]

So, in terms of specific categories in apparel I would say it was more broad-based than the north. Now again I think the biggest differentiator is going to be we’ve been able to do some preview of fall fashions when we’re able to introduce new brand or one or two we introduced in July. We’ve actually seen pretty good results. So we think the apparel business has been so healthy that again, we think it’s going to rebound. It feels like little bit of a sort of broad overhang as opposed to our particular category that was especially challenged. And I’m sorry, remind me of your second question?

[Ed Yruma:]

Yes, just trying to understand from a bigger picture perspire how important do you think Easy-Pay is to drive top-line and kind of what are the financial return metrics you look at when you make decisions as to how much you should allocate to the Easy Paper wrap?

[Courtnee Chun:]

We do think UG Pay is important and even though we’ve moderated the UC [indiscernible] we’re certainly still, using it in a meaningful way. It’s to me because we don’t have a lot of promotional lovers in our business, it is I think part of the YQBC story that our customers get and value. And because of the high loyalty of our customers, it ends up being a relatively modest expense. In fact most write-offs associated with Easy-Pay, the overwhelming amount of the write-offs associated with Easy-Pay are actually from new customers. We don’t have quite the same experience base. The write-off rates from our existing customers, especially once they’ve made a few purchases or been with us couple of years is really quite low. So overall, you’re talking about a program that has a less than 2% expense rate and so we view this as extremely efficient program that does create a differentiation for QVC. And because that write-off rates popped up a bit, we’re being a little bit cautious right now about the use of it. But we see it as an important ongoing program. And not necessarily critical to accelerating sales but just something that we need to be able to offer. And we fully expect to be able to continue to offer.

[Ed Yruma:]

Great. Thanks so much.

[Greg Maffei:]

Great. I think that’s what we have time for today. Thank you to the audience for your continued interest of Liberty. And we look forward to speaking with you again next quarter if not dinner. Thank you.

[Operator:]

Thank you. And that concludes today’s conference call. You may now disconnect.