Qurate And Quarantine: Will Home Shopping Push This Name Higher? (NASDAQ:QRTEA)

Strip malls are history. – Jeff Bezos

Let’s be honest. Many of us have been spending a lot more time in front of our televisions and computer screens lately. Whether you’re watching the Sopranos for the first time or placing your order for next Monday’s grocery pick up, odds are you’ve been glued to your digital devices as well.

COVID-19 restrictions have zapped revenue from physical retail spaces, as consumers have been forced, or chosen in many cases, to remain home. It comes as no surprise that a company that operates popular online and televised brands, like HSN (formerly Home Shopping Network), would be positioned to benefit from this dramatic shift in consumer behavior.

Qurate Retail Inc. (NASDAQ:QRTEA) is a massive media conglomerate in the video and eCommerce spaces in North America, Asia, and Europe. The company employs over 25,000 individuals and oversees brands that reach nearly 400 million households, marketing and selling a range of consumer products via television, web, and mobile applications. It also owns the Zulily brand, an online retailer selling clothing, home, and beauty products, among many other items.

QRTEA has had a bumpy few years. It’s a volatile name that’s seen its shares drop precipitously, only to rebound. It’s currently been enjoying a rise in price since April and is now trading higher than its pre-COVID-19 level. With pandemic restrictions still in effect, and tightening up in some places, Qurate shares may be well-positioned for increased appreciation as we move into the final quarter of 2020.

QRTEA, though volatile, has performed exceedingly well YTD. This welcome performance comes after a collapse in its share price during the preceding two years. Source: Y-Charts

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QRTEA enjoyed a strong Q2 2020 operational performance. Despite the pandemic, total revenue was up over $300 m compared to Q2 2019. Notably, the company enjoyed increased revenue from its eCommerce lines in 2020, showing its ability to succeed under the unique constraints imposed on shoppers due to COVID-19. Compared to Q2 2019, eCommerce in Q2 2020 was up almost 20%.

Source: Qurate’s Q2 2020 Earnings Results

QRTEA’s quarterly gross profit margin has also been impressive, over 50% better than peers in the consumer cyclical sector.

Qurate’s 35.21% quarterly gross profit margin dwarfed the sector average of 22.38%. Source: Y Charts

Given the apparent challenges physical retail will continue to face if pandemic restrictions don’t soften, Qurate will likely enjoy increased demand in its remote shopping offerings. Of course, with consumers increasingly comfortable shopping online, coupled with approaching winter, COVID-19 probably won’t be the only reason Qurate sees an improvement in revenue over the coming months.

A report by McKinsey shows online shopping is expected to capture an even larger share of overall consumer purchases.

QRTEA could see a breakout in price if pandemic restrictions continue to force mall closures, prompting an increased demand in alternatives to physical retail. Consumers will be facing uncharted territories with pandemic restrictions combined with January weather. It’s likely shopping at home will only look more attractive under these conditions.

Who knows, maybe Qurate’s “Third Way to Shop” will soon be the only way to shop.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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