QVC Group, the parent of home-shopping networks QVC and HSN, has been selling its real estate for several years in trying to deal with mounting debt that has now landed it in bankruptcy court.
The West Chester, Pennsylvania-based company on Thursday filed for voluntary Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas. QVC Group has a prepackaged financial restructuring plan in place with lenders that will reduce its debt to $1.3 billion from $6.6 billion. The company's two networks will continue to operate without interruption.
QVC Group said it expects to emerge from Chapter 11 in roughly 90 days as a deleveraged company called Reorganized QVC. Atypically short Chapter 11 cases have prevailed recently. For example, luxury retail giant Saks Global expects to wrap up its proceedings soon as it approaches the 100-day mark.
For several years now, QVC Group has been transitioning from owning its locations — its headquarters, studios and warehouses — to selling them and becoming tenants in sale-leaseback deals to raise cash. QVC Group also put HSN's 65-acre headquarters campus in St. Petersburg, Florida, at 1 HSN Drive and 2501 118th Ave. up for sale, and that property is under contract to be sold to developer Greystar, according to various media reports.
QVC Group was a pioneer in selling goods via TV. But with the rise of e-commerce, QVC and HSN, like some traditional brick-and-mortar retailers, struggled to compete, catch up and participate on social media platforms like TikTok and Instagram. Sales dipped for the two home-shopping channels.
"Despite its engaged customer base, QVC Group has faced a confluence of headwinds in recent years that have stressed its financial performance," Chief Financial Officer Bill Wafford said in an affidavit filed with the court.
"Cord cutting is eroding the once reliable cash flows from QVC Group's linear TV business," Wafford said. "In addition, QVC Group has faced record inflation, supply chain disruption during the COVID era, elevated labor costs, the uncertainty of U.S. tariff policy, and a December 2021 fire at the Rocky Mount distribution center that caused QVC Group to lose more than 1 million customers and more than $500 million in revenue due to compromised product and service ability."
Several of the steps that QVC Group took to address those challenges related to its brick-and-mortar presence, according to Wafford. The company "took advantage of favorable real estate markets to sell properties and enter into long-term leases with the purchasers," he said.
Major sale-leaseback deal
In July 2022, QVC Group entered into a $443 million sale-leaseback for several distribution centers and QVC's headquarters-and-studio campus at 1200 Wilson Drive in West Chester. The buyer was private equity firm Oak Street Real Estate Partners. Then QVC Group leased those properties back, with term expiring July 31, 2042.
The distribution centers were at the following locations: 2200 TV Road, a 1.1 million-square-foot warehouse in Florence, South Carolina; 1 QVC Drive, a 1 million-square-foot distribution center in Suffolk, Virginia; and 857 Mountain View Drive, a 1 million-square-foot distribution center in Piney Flats, Tennessee.
QVC Group reported that it saw a $277 million gain related to those sale-leasebacks.
The company took a significant hit in December 2021 when a fire severely damaged its second-largest fulfillment center, in Rocky Mount, North Carolina. That facility processed roughly 25% to 30% of the volume for QVC U.S. and also served as the network's primary returns center for hard goods.
The building never reopened. QVC Group sold it in February 2023 for net cash proceeds of $19 million, according to securities filings.
"We assessed our network footprint and are making investments to increase throughput as a result of the loss of the Rocky Mount fulfillment center," QVC Group said.
The company also leases a distribution center in Ontario, California, through Dec. 31, 2030.
Campus consolidation
In January last year, QVC Group announced it was going to consolidate HSN's operation and bring it to West Chester, closing the St. Petersburg campus, in another effort at cost-cutting and efficiency. The company put the campus up for sale, with CBRE handling the marketing.
Greystar has the roughly 65-acre campus under contract, according to several media reports. Local officials have approved plans for a 400,000-square-foot industrial park on about 40 acres, according to St. Pete Rising. And Greystar recently submitted an application to build garden apartments on the remaining roughly 20 acres at the property.
Greystar declined to comment Friday, and QVC Group didn't respond to an email from CoStar News seeking comment.
But QVC Group in a securities filing this week reported that in September, QVC entered into agreements to sell the St. Petersburg properties, with two of those sales closing in December.
"The sale of the remaining property is expected to be completed within the next 12 months," QVC Group said.
The company added, "We do not anticipate any future problems renewing or obtaining suitable leases for our principal properties."
QVC Group's international operations are not included in the U.S. bankruptcy proceedings.
For the record
Kirkland & Ellis and Gray Reed are serving as legal counsel, Evercore Group is serving as financial adviser, AlixPartners is serving as restructuring adviser, and Joele Frank of Wilkinson Brimmer Katcher is serving as strategic communications adviser to QVC Group and QVC.