Liberty Interactive's (LINTA) CEO Gregory Maffei on Q1 2014 Results - Earnings Call Transcript

May.11.14 | About: Liberty Interactive (QVCA)

Liberty Interactive (LINTA) Q1 2014 Earnings Conference Call May 8, 2014 ET

Executives

Courtnee Ulrich – Vice President, Investor Relations

Gregory Maffei – President & CEO

Christopher Shean – Senior Vice President and Chief Financial Officer

Mike George – CEO of QVC

Analysts

Matt Nemer - Wells Fargo Securities

Eric Sheridan – UBS

Alex Fuhrman – Craig-Hallum

Barton Crockett – FBR Capital Markets

Matthew Harrigan – Wunderlich Securities

Thomas Forte – Telsey Advisory Group

Benjamin Mogil – Stifel Nicolaus

Operator

Good day everyone and welcome to the Liberty Interactive First Quarter Earnings Call. Today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Courtnee Ulrich, Vice President of Investor Relations. Please go ahead ma’am.

Courtnee Ulrich

Good morning. 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, the proposed creation of the QVC group, and Liberty Digital Commerce Group tracking stocks, the proposed spin-off of Liberty TripAdvisor holdings, market potential, future financial performance, new service and product launches and other 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, our ability to satisfy the conditions to both the proposed recapitalization and proposed spin-off, 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 change in Liberty Interactive’s expectations with regards thereto or any change in events, conditions or circumstances on which any such statement is based.

On today’s call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations, preliminary note and Schedules 1 through 3 can be found at the end of this presentation.

And now I’d like to introduce Liberty’s President and CEO, Greg Maffei.

Gregory Maffei

Thank you, Courtnee, and good morning to all of you. Today speaking on the call we will have Liberty’s CFO, Chris Shean; QVC’s CEO, Mike George.

On to some of our highlights at Liberty Interactive; QVC experienced solid margin performance in the United States and the U.K. result was strong across the board. In the U.S. QVC.com penetration rose to 45%, that’s an increase of 327 basis points over last year. In a very positive trend 37% of those orders were mobile. The Japanese results were negatively impacted by currency movements. We also had a strong issuance of new senior notes, quarter million of [indiscernible] due in 2019 and $600 million of 4.85% notes due in 2024. It was a rough quarter for our ecommerce companies and we were quite disappointed by their performance.

Provide Commerce was negatively impacted by the storm around Valentine’s Day particularly to those of you on the east coast. We saw some reduced demand at back country Backcountry and Bodybuilding.com. All of the managed routines of those companies are very focused on their operations and executing on their plans for a strong 2014. We also took actions at several of our other ecommerce companies. We have a new CEO at BuySeasons, Rick Barton who was formerly the quite successful CEO of Leisure Arts, another subsidy of ours. And we are conducting a search for a new CEO at Evite.

Notably, Commerce Hub again posted outstanding results. We continue to progress with the creation of the Liberty Digital Tracking Group – excuse me, Liberty Digital Commerce Group, tracking stock and expect to file the F4 for that with the SEC shortly. Also notably, we repurchased $224 million of LINTA stock from February 1 through April 30.

Turning now to Liberty’s ventures, we reported strong first quarter results to TripAdvisor. Trips revenue was up 22% year-over-year to $281 million. Adjusted EBITDA was 12% as they continue to invest in the business and the mobile audience grew to more than 44% of total traffic. Also notably, Trip announced an agreement to acquire La Fourchette, a deal which should allow it to monetize its large restaurant traffic center. We at Liberty filed an S-1 related to the proposed spin-off of Liberty TripAdvisor Holdings with the SEC on May 6 and also at Liberty Ventures w created – we completed rather a two for one stock split of the Liberty Ventures tracking stock in April.

With that, let me turn over to Chris Shean to discuss some of the financials.

Christopher Shean

Liberty Interactive Group’s revenue increased 1% in the first quarter, while adjusted OIBDA was down 1%. Liberty Interactive’s ecommerce business’s revenue was flat for the quarter while adjusted OIBDA decreased 41%. As Greg mentioned the winter storm Pax which occurred around Valentine’s Day had a very negative effect on provides operations with the liberty issues in such. We also had Easter fall in Q2 rather than Q1 which caused some comparability issues. As a result of both of these, we had revenue weakness in the quarter for them.

Additionally Backcountry and Bodybuilding experienced low first quarter demand. The decreased and adjusted OIBDA was due to increased technology and personnel cost of these subsidiaries to support anticipated growth which did not materialize slightly lower product margins during the period, somewhat due to increased packaging costs and increased marketing spin for the first quarter – that did not yield anticipated sales.

Now we’ll take a quick look at the liquidity picture. At the end of the quarter, Liberty Interactive Group had attributed cash of $682 million and $5.3 billion in principal amount of debt. QVC’s total debt to adjusted OIBDA ratio as is defined in their credit facility was approximately 2.2 times as compared to a maximum allowable leverage of 3.5 times.

With that I’ll hand the call over to Mike George for in-depth commentary on QVC.

Mike George

Thank you, Chris. We had a solid Q1 with strong adjusted OIBDA market expansion, balanced growth among existing new and reactivated customers and continued progress on our digital commerce and other key initiatives. We were especially pleased with our performance in the U.S. in a difficult environment and saw strong gains in the U.K. and China, partially offset by continued challenges in Germany and we were delighted to announce last month our plan to enter into the French market.

Ecommerce continues to perform well up three points to represent 39% of global revenue and 45% of U.S. revenue in constant currency and mobile order grew nearly 60% and represents 39% of all global ecommerce orders. Now looking at the results by market, in the U.S., revenue growth was 1% with the prolonged winter along with the Easter shift and lost viewership to the Olympics hampering growth. However OIBDA margins expanded strongly due impart to a mix shift from electronics to higher margin of apparel, home and beauty products. And despite the softer revenue growth, we were pleased to see strong performance on many dimensions.

We achieved our highest first quarter overall customer count since 2007 and our highest first quarter new customer count since 2005. And we saw balanced results across most product categories with the exception of consumer electronics which does remain soft. Our home division showed good momentum. We saw strength in home environment products like heaters and humidifiers and several cooking events grew big audiences online and on air and generated great sales results from brands like Vitamix, Kitchen Aid and New Wave. In March, we offered a steady stream of innovative new patio and garden products from brands like Roberta's as well as gardening tips and suggestions on our digital platforms that help customers celebrate the long awaited change of seasons.

Beauty, apparel, accessories and jewelry also generated good results. Customers responded well to our spring beauty event as well as the exclusive launch of their minerals bareMinerals, bareSkin Foundation. In fashion, we had success with brands ranging from Joan Rivers to Isaac Mizrahi Live, LOGO by Lori Goldstein, Clark’s and Vera Bradley. And it was good to see jewelry gaining momentum with several successful events including Gemstone Day and California Gold Rush. We also continue to see positive results in attracting new customers to QVC using pop culture events and network integrations.

In January, Project Runway All Stars season three wrapped with QVC prominently in every episode. This network integration with QVC as exclusive sponsor or the accessory wall increased crossover viewership between Lifetime and QVC increased our brand visibility and growth sales of future products. In this season’s grand prize winner Seth Aaron Henderson unveiled an exclusive new collection during our fifth annual red carpet broadcast from Beverly Hills. This prime time multimedia event attended by leaders in the fashion, entertainment and media communities during Oscar week grow strong viewership to QVC and attracted many new comers to our broadcast and digital platforms. And this year’s red carpet event also marks the kick off of an innovative viral marketing campaign with Disney and supported their new movie Muppets Most Wanted.

The QVC and Disney teams collaborated to create this five week long social media frenzy involving an epic feud between Miss Piggy and Joan Rivers culminating with the Muppets taking over QVC on Sunday March 16. Also the campaign generated hundreds of millions of media impressions worldwide and well over one million YouTube views and helped to reinforce QVC’s stature as a topical pop culture brand. We continue to improve our service experience in the U.S. that every touch point through steady improvements, the speed of delivery and rich content delivered after the purchase to deepen our customer’s connection with QVC.

Now turning to Japan, as you recall – impacted by the analog to digital shift over the last few years which loaded our channel position and led to declining new customer count. These headwinds contributed to the modest revenue declines in the back half of last year. And so we were pleased in Q1 from the turn to positive revenue growth in local currency and our new customer count grew slightly in the quarter. That’s our first positive growth in new customers in nearly two years. Unfortunately we weren’t able to translate the revenue improvement in OIBDA growth. Adjusted OIBDA margins declined due to softness of product margins driven by both product mix shifts and added promotional activity along with the step up in programming and fusion cost that we discussed on past calls, much of which we have now at anniversary.

We saw these modestly improved fundamentals in Q1, at the start of Q2; we are dealing with the significant short term challenge stemming from the VAT increase in Japan from 5% to 8% that went into effect April 1. This increased poll forward consumer spending in the march. But that primarily benefitted sales of autos appliances and other consumer durables and this was followed by a significant spending pull back in April. Our revenues declined in April in line with the declines reported by Japan’s leading department store retailers. We think the worst of this is probably behind us. But even if it is, the April decline will likely have a material impact on Japan’s Q2 results.

Looking at Germany, Germany as you know is also being hurt by the conversion from analog to digital which has resulted in a significant increase in the number of channels creating more competition for viewers’ time and attention. This is not unlike the transition that we experienced in the U.S., in the U.K. and worked through several years ago. In addition as I shared on past calls, we’ve struggled with executional issues in key categories that have taken longer to address than we expected. Under the interim leadership of European CEO Steve Hawkman, we’re executing a comprehensive plan to systemically address the underperformance in Germany focused on enhancing our brand portfolio and increasing program and variety, continuing to expand our digital commerce, capabilities, improving the rigor and consistency of daily execution and driving a structural reduction in our fixed cost base.

No in Q1 we were also impacted by the deployment of our new European systems platform in Germany. This was a significant milestone for us. We are delighted to have it behind us. But it did cause some short terms sales disruption. We think that without the systems impact, revenue growth would have been roughly flat or maybe slightly down and so a modest improvement over the recent trend. We’re now fully past these issues and do not expect any material impact on Germany’s Q2 results.

Now the decline in OIBDA margins was largely driven by weaker product margins as we shifted the business away from fashion and jewelry, although this had a corresponding benefit to return rates. We also had a number of one-time expenses in the quarter mainly related to the system’s deployment, but these were offset from the benefits of anniversary in personnel tax accrual that we took last Q1. In U.K., with our standout business in Q1 with a whopping 10% revenue growth and 32% adjusted OIBDA growth in local currency; we’re clearly benefiting from an upturn in the economy, but we’re also getting good traction on a number of strategic initiatives.

We launched two additional niche channels in mid-2013 and along with the beauty channel that we previously launched – these channels are driving incremental growth. The ecommerce also performed strongly up 22% in local currency fueled by an 81% growth in mobile orders which represent a 55% of all ecommerce orders. Finally, we’re – we’ve continued to see strong gains in product margins due in large part to pricing moves that will anniversary in May and numerous expense efficiencies most notably in our warehouse operations.

In Italy while we’ve continued to be very confident in the long term potential of this business given the high levels of customer retention, customer spend and purchase frequency that we enjoy, we were disappointed with the low single digit revenue growth. It was driven largely by a reduction in sales of some of our largest home brands. That’s to us a clear indication that we’ve over relied on these major brands and need to expand our mix of home categories, brands and key items to keep our customers engaged. This is often a challenge in young markets as we deal with less mature vendor base and limited merchandising resources, so we’re taking a number of steps to clean up inventories in these larger brands, add staff to our home division and expand the product base. We’ve also seen some softness in new customer acquisition as we pull back from our heavier marketing spend. We’ll continue to monitor brand awareness and may modestly ramp up our marketing spend in future quarters. As you know, we’ve been just slightly below OIBDA breakeven for a couple of quarters now. This is an important and symbolic milestone for us. We would love to get past it. But of course, we don’t want to rob the business of needed resources just to hit the breakeven goal.

Our product margins are strong. The cost structure is well managed and the delay in hitting breakeven simply reflects the slower revenue ramp that was initially anticipated. Those are clearly are on the path to breakeven. We are very encouraged by the continued strong performance of our newest market China with revenue up 27% to $212 million R&D and a modest OIBDA loss of $9 million R&D. We saw strong growth in every product category; added over 10 million net new homes in the quarter and bringing our total home count over 80 million and introduced over 200,000 new customers. We also achieved strong gains in product margins up 360 basis points. But these gains were roughly offset by higher programming distribution costs associated with this added carry. The China team was really focused no executing all of the QVC fundamentals, but we’re increasing the rate of new product introductions leveraging our global vendor base and executing more engaging programming.

As a result of these efforts, we’re now seeing modest but sustained increases in repeat purchase rates and we continue to believe this business has extraordinary growth potential. And finally we were delighted in April to announce our plan entry into France with an anticipated on air date of Q2 2015. We have long aspired to be in France, the second largest market in Europe by GDP. One of the barriers entering France in the past has been the limited channel availability and regulatory requirements mandating a majority local partner to broadcast on the free-to-air platform. To control the business ourselves and to be able to capture 100% of the economics, we decided instead to operate a channel to broadcast over the pay TV networks which do not carry the same foreign ownership descriptions.

Fueled by the rapid growth of IPTV, these paid TV services which also include cable and satellite will reach nearly 20 million homes in France and in French speaking Belgium by 2016. That’s up from just 12 million homes five years ago. We anticipate that we will secure access to the majority of these homes by launch. We’ve appointed Steve Bridgeman as our France CEO effective immediately. Steve brings 15 years of QVC experience including stints as the Chief Operating Officer and most recently the Chief Merchandizing Officer for our U.K. business. We estimate our initial capital investment to be just north of $20 million with roughly $15 million through the balance of 2014 and about $5 million in 2015.

The $15 million CapEx estimate for 2014 is incremental to previous CapEx guidance for the year. We’ve kept the upfront capital investment much lower than Italy by leveraging our new regional and global systems platforms leasing the headquarters building and outsourcing logistics and customer service operations to top tier third party providers. And finally, we look forward to hosting you next week at our QVC investor meeting on May 15 here at Studio Park. And with that I’ll turn it back to Chris.

Christopher Shean

Thanks Mike. Now let’s take a quick look at the liquidity picture of the Liberty Ventures Group. At the end of the quarter, the group had attributed cash in liquid investments of $1.9 billion and $2.4 billion in principal amount of attributed debt which includes $745 million of TripAdvisor cash and liquid investment and $361 million of their debt facilities. The value of the public equity method securities and other public holdings attributed to the group was $2.2 billion and $1.1 billion respectively at the end of the quarter. Now, I will hand the call back to Greg.

Gregory Maffei

Thank you, Chris and thank you, Mike. Audience, we appreciate your continued interest in Liberty Interactive and to that operator, I think we’re now ready for some questions.

Question-and-Answer Session

Operator

[Operator Instructions] We’ll take our first question from Matt Nemer. Please go ahead. Your line is open.

Matt Nemer - Wells Fargo Securities

Thanks for taking my questions. So first I wanted to ask about the ecommerce business. Can you give us any color on what their revenue growth would have looked like – provide – I’m thinking maybe Celebrate may have also been a drag. I’m trying to get a sense for the quarter LDC growth.

Gregory Maffei

The winter storm Pax with the primary optical that Provide had and that was about $13 million of revenue. In most, that was down the contribution margin from our early calculations.

Matt Nemer - Wells Fargo Securities

In addition how far behind were we at Celebrate buy year-over-year?

Gregory Maffei

Celebrate was down versus the prior year $3 million or $4 million.

Matt Nemer - Wells Fargo Securities

Okay, great. That’s helpful.

Gregory Maffei

The biggest impact was definitely the storm that hit over Valentine’s Day.

Matt Nemer - Wells Fargo Securities

Okay, great. And then as a follow up to that, but I think this also applies to QVC. Given the weather and the Q1 experience across retail this year and your inventory, it seemed like it was up quite a bit at the end of the quarter. Do you think that there’s an inventory hang over that impacts margins into the second and the third quarter, are you able to clear that pretty quickly?

Gregory Maffei

Are you asking at E-com or at QVC?

Matt Nemer - Wells Fargo Securities

Really, both. It’s hard – we don’t see where the inventory is. So I guess --.

Gregory Maffei

This was not at QVC. I’d say it’s not much of a factor at the Ecommerce companies thinking about you know, the inventory there that was most negatively impacted with seasonal and short life. It’s not – either got flushed and taken out. It’s not going to be stuff that’s overhanging. Mike, you want to comment about QVC?

Mike George

Yeah, overall we’re very comfortable with our inventory position. We had a bit of a buildup in Germany. Ironically it’s for the opposite reason and extremely hot winter. But overall, we have a little bit to work through in Germany. But overall, we think our inventories are pretty solid in don’t see them having a material impact in the company other than some modest impact probably in Germany as we clear through some apparel and home textile inventory.

Matt Nemer - Wells Fargo Securities

Okay, and then just lastly Mike, if you look at the growth in Italy, I mean how does that compare to you know, other market launches; it would seem like for a market that is relatively immature, but you should be growing mid-singles, high singles, maybe doubles for many years. Have you seen this before as you’ve entered new markets?

Mike George

I guess a couple of things; so first of all, we definitely don’t think we should be in low to mid-single digits to your point. We should certainly still be in double digits at this point in our evolution. So this was a bump for us. You know, we don’t think it’s going to be meaningful for the longer run. I do think we’re just – we’re a little overconfident and some of the more successful brands and probably leaning on them a little too heavily. You know, if you look back at every one of our launches, maybe with the exception of Japan, they were not linear. They had ups and downs, took a number of years to reach breakeven, I think five years in the U.K., seven years in Germany, so these things aren’t as linear as you’d like them to be. It’s still a slugfest retail business.

But they all kind of emerge as healthy long term value drivers and we’re very confident of that. And Italy – but definitely disappointed. We would have wanted to be double digit revenue growth in the quarter and so, yeah, a little bit of work to maybe get back on that – back on that track. But we think we can get that done.

Matt Nemer - Wells Fargo Securities

Great, very helpful. Thanks so much.

Operator

And we’ll go next to the side of Eric Sheridan. Please go ahead. Your line is open.

Eric Sheridan – UBS

Thanks for taking the question. So just one; on the customer growth, Mike as you called out maybe some of the drivers of why the customer growth was so strong and whether it was a – in certain geographies or some of that you guys did to stimulate demand? Thanks so much.

Mike George

Yeah, so we had really healthy customer growth in the U.S. – in fact, if I had to point to a couple of drivers, I would point to the launch of Q Plus, our second channel last fall as well as our expansion of carriage – our over-the-air carriage in the U.S. I think that added TV reaches are helping us, supported by, I think continued growth in our digital platforms and OLM in particular to support digital platforms as well as some of the show directly, I think some of these network integrations like the project runaway is elevating our viewership. I think all those things are working towards in a big established market to be able to get kind of record levels of new customers.

In the rest of the world, there’s a little bit of a mixed story. Japan went from the big negative to being flat as we start and I think that’s a little bit of sort of anniversary, these big declines we’ve had and hopefully getting to the point of more stability. U.K. also I think helped by their niche channels – saw good growth and a little more mixed in Germany and Italy.

Operator

And we’ll go next to Alex Fuhrman. Please go ahead. Your line is open.

Alex Fuhrman – Craig-Hallum

Great, thanks for taking my question. You know, interesting – about the customer acquisition, it sounds like you know, a lot of the new customer acquisition is coming from increased carriage on the television and then we’re also seeing the mobile commerce numbers that we see in terms of the transaction rising sharply. I was wondering if you can talk a little bit about from your perspective the viewership of your content whether that’s on television or on mobile or tablet devices or just on QVC.com. To what extent is that viewership migrating more towards web based distribution and I’m curious, you know what you’re seeing with your newest cohort of customers that’s really been driving your customer file to record highs here? You know, is that new cohort of customers more likely to be purchasing items that were aired on TV in the last 24 hours or is that group more inclined to the offline side of the business?

Mike George

A couple of – great question and it certainly is evolving at a high pace. I would say – true kind of – meaningful levels of viewing, the live TV experience I would say, it’s still predominantly over the TV platform. So we’ve got a great live streaming experience on the tablet and on mobile and you are seeing people engage on those platforms and view content, sometimes live content, sometimes cable content and we continue to experiment with that, you know, because that’s a harder get, it’s more of a lenient experience. And so you have to really engage them beyond just the traditional life content. But for example, we did a customized video piece with Mally who is one of our top beauty vendors, a really wonderful kind of tutorial piece that we only aired on our internet platforms. And I forget the number of average minutes that that video was viewed, but you know, people were engaged for 15, 20, 25 minutes which on the internet, you know a big number.

So most of the viewership was clearly still the live – you know, for TV platforms, but I think as we do more and more – kind of paler content to these other kinds of platforms, we’re seeing that viewership pick up. You know, in terms of the new customers, you know, we do know that they’re more likely to have an existing customer to buy an off-air product – say the off-air products are bigger part of the mix for the new customer and they’re much more likely to use our digital platforms. So the existing customers as you heard earlier, you know, we have that 41% of our sales mix – 41%, 42% in – I’m speaking to last year’s numbers now in digital for the new customer to look over last year, it was about 68% of our – the sales were on the digital platforms, so substantially higher than the existing. And along with that, comes a higher mix of off-air items. So we do think these platforms are really extending the experience in making this more relevant to a new generation of customers.

Alex Fuhrman – Craig-Hallum

Great, that’s really helpful. Thank you.

Operator

We’ll go next to Barton Crockett. Your line is open. Please go ahead.

Barton Crockett – FBR Capital Markets

Okay, great thank you. I wanted to ask you a question about the TripAdvisor spend. Based within the filing – for which that, just that this could make it easier for a combination overtime of TripAdvisor and Liberty TripAdvisor, I thought if you could give us your thoughts about, you know, how you think about controlled premium in that context, you know if you think there’s reasonable argument for the TripAdvisor shares with in Liberty TripAdvisor getting a premium for the voting info they have? And also you know, there is a dual share class kind of structure of Liberty TripAdvisor, AB shares, the B shares I assume mainly owned by John Malone. Do you think you know, that’s a combination that there should be an additional premium paid for the B shares over the A shares?

Gregory Maffei

Well, it’s often the case of high vote shares particularly when they have with them a majority of the vote or a substantial portion of the vote and get a premium. We have no plans obviously emerge liberty TripAdvisor with TripAdvisor, but it’s a backdrop. It is not unusual that this kind of shares get a premium. Correspondingly, I’m not negotiating with John Malone over his shares and we are not talking about in any way, shape or form collapsing his shares, but it is not unusual that somebody who has a significant portion of votes will get a premium for their shares as well. So I think your point about B shares, high vote shares, if you have enough of them, it’s a meaningful comment. But if you – you know, there is no plan to intend on any of those.

Barton Crockett – FBR Capital Markets

Okay, great. And then I’ve just got one other quick question on the ecommerce side. Bodybuilding has been such a great performer, but you called it out here as having a kind of weaker quarter. What happened, at what kind of changed or kind of slipped a little bit?

Gregory Maffei

I think you’re right. I mean Bodybuilding has had just straight line growth basically for its entire life. And this is the first quarter where it really had not had that cycle. Most of the challenges were around international. We are – I would say management including Liberty management digging in deeper into why some of that occurred. And we’re probably not ready to make mistakes again. But they have an action plan on growth and you’re right. That’s been a very consistent strong grower for its entire tenure.

Barton Crockett – FBR Capital Markets

Okay, great. Thank you.

Operator

We’ll go next to Matthew Harrigan. Please go ahead. Your line is open.

Matthew Harrigan – Wunderlich Securities

Thank you. Some European retail markets, you know apart from the conditions on carriage and all that, that might – very different and redundant, I think Italy is you know, pretty sclerotic. I mean Spain; I think had some really good retailers. Even everyone knows about the unemployment rate. France, you know the Luxury Alice’s are globally renounced. But can you talk a little bit about the structure that France, you know retailing business, you know who you’re competing with? And I know you’re kind of your own animal, but how easy is it to make intros in France compared to Germany or Italy or a market like that?

And then secondly, I know it’s early, but what are you seeing in looking at X1 and rising over in Europe in terms of how that effects, you know, the QVC business model in terms of opportunities, in terms of usage or maybe even you’ve seen a little bit more of the push strategy or social media strategy?

Christopher Shean

And so on the retail markets, it is a little too early to say in France exactly who will take share from, you know – there are small competitors directly in the TV shopping space. Now we think we’ve got a better formula than those competitors. But there is – there are competitors out there doing some business in TV shopping. You know, beyond that I would say the market, you know some way it says a little bit like Italy. There’s a little bit more of a – it’s a market, there’s lot of shopping. There’s a little bit more of a boutique feel to the market, although not completely. There are some bigger and very successful national brick and motor players in France as you know. So you know, and a little more – a more healthy I will say ecommerce and distance selling markets than Italy was.

So on balance, it feels like we’ve got a market that is engaged in ecommerce. So we’ll get that component of our business. There’s a little bit of TV shopping. Then we think we can channel much better version of – and then a range of national players and boutiques. So you think, you know, share comes from all of those and of course, you know – just that the comparison to Italy, clearly the per capita income and GDP is higher in France, probably 20% or so higher in France than Italy. So you’re given with a somewhat wealthier household base as a starting point. So you know, we think it’s a healthy shopping market and good income levels from the households and I think it should be a good opportunity for us.

And forgotten your second question Matthew.

Matthew Harrigan – Wunderlich Securities

You know, I know it’s really early, but with the whole TV experience changing and TV still being a big engine for you, where do you see are the X1and horizon over in Europe or is it still too early or are you pretty excited about how that UIs are evolving in the implications for QVC?

Mike George

You know, I don’t [indiscernible] mirroring up with that Matthew, I think in general, you know the TV viewership remains high. We are seeing – you know, U.K. has been a bit of an experimental lab for us with interactivity and those kinds of over the top applications. Although, we’ve tried to be an early leader in that area, but it’s – we’re still seeing very limited customer adoption of those platforms. You know, the other markets have remained pretty traditional carriage markets. So I’m not sure if I fully answered it, but that’s sort of how we see the landscape.

Matthew Harrigan – Wunderlich Securities

We’ll forward it next week. Thanks, Mike.

Mike George

Yeah, same here. Thanks.

Operator

We’ll go next to Thomas Forte. Please go ahead. Your line is open.

Thomas Forte – Telsey Advisory Group

Great, thanks. Question is up for Mike and I’m also looking forward to QVC next week. Congratulations on the entry into France. I apologize for being premature, but is it still early to look at other international opportunities you discussed in the past, either Brazil or Spain or Mexico or Turkey? And then what's your take on the consumer electronics environment now for QVC? Should we expect continued softness relative to other categories in the go forward basis or is there something to get excited about there? Thanks.

Mike George

Yeah thanks. So we are excited about France and it is a little too early to talk about the next one. I will characterize it as we are sort of deeply exploring the handful of opportunities. I don’t know that I see anything that’s immanent. Sometimes these things surprise you and they accelerate faster than you would expect. But you know, yes it will be a while before we have another market to talk about. [Indiscernible] enough resource obviously on the France deployment and then we’re continuing to be in a sort of earlier phase of the work across a number of markets to see which one emerges. So we want to keep on the pace, but don’t at this rate we think it’s immanent in terms of the next market after France.

In terms of the consumer electronics business, you know it’s hard to read it. I think it’s going to continue to be challenging. I don’t know if that it will be a big drag, but I don’t see it as something to be excited about. You’ve got a couple of world anchors that I don’t know if they’re going to turn – turn them in the near term which is, you know, the TV market. There’s really not much new in TV and so at some point that next level of HB will take off. But that good luck is a little bit out there. And you know the kind of bread and butter digital camera business has gone the way of the iPhone. So we’re seeing an okay business in higher end digital cameras. But those are a couple of bigger businesses to anniversary and then the other challenge is we still did a very good computer business. But of course, a lot of the computer businesses traded for tablets and that’s a – maybe a crate up in units, but a crate down in revenue when we go from a computer to a tablet. That said we occasionally have a lot of success on a great computer offer. So tablets will be good. Computers will be next. Probably the balance of the two is in a big growth; a little bit of weakness in TVs and cameras; some success in cell phones. We’ve never had a big market for cell phones. We started to build that business. So I think it will bounce along not a huge grower, but also not a – also don’t see it as being a big pressure point either.

Thomas Forte – Telsey Advisory Group

Thank you.

Operator

And we will take our final question from Ben Mogil. Please go ahead. Your line is open.

Benjamin Mogil – Stifel Nicolaus

Great, thanks for taking my question. On your new customer number which I gathered, you said it was the highs in the first quarter since ’05. What do you think attributed to that?

Mike George

I think it was some of the carriage expansion that I was mentioning earlier. I think the biggest drivers were the launch of Q Plus, our second channel in the U.S. and the expansion in over-the-air carriage. So I described that as being the biggest driver and then probably after that would be, you know investment in online marketing, investments in some of the network integration efforts that are extending the brand visibility to more customer.

Benjamin Mogil – Stifel Nicolaus

That’s great, Mike. Thanks a lot.

Mike George

Thank you.

Gregory Maffei

Great. Thank you, operator. Thank you all for your continued interest in Liberty Interactive. We look forward to speaking with you again next quarter, if not sooner. Thanks.

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