Ladies and gentlemen, thank you for standing by. And welcome to the Liberty Interactive Corporation Third 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 Tuesday November 8, 2016. I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead..

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, future expenses at QVC, 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, 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, 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 change in Liberty Interactive's expectations with regard 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, 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. 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’s President and CEO..

Thank you, Courtnee. Good morning to all of you listening out there. Today, speaking on the call, we will also have Liberty Interactive's CFO, Mark Carleton; QVC's President and CEO, Mike George; the President and CEO of zulily, Darrell Cavens.

Unfortunately, the TripAdvisor doesn’t report earnings until tomorrow we will not be answering questions regarding Liberty TripAdvisor on this call. On to the highlights, as expected QVC posted negative results this quarter, Mike will discuss those in more detail in a minute.

However, we are seeing some sequential improvement thus far in Q4 and we did local currency sales gains in all consolidated international markets. Once again demonstrating the benefits of a diverse portfolio of markets. In Q3 consolidated mobile penetration was 59% of QVC.com orders, and U.S. mobile penetration was 58%.

zulily posted strong results once again revenue was up 14%, adjusted OIBDA was up 20%; orders from repeat customers were up to 92%. We also repurchased $188 million of QVC A shares from August 1st to October 31st.

At Liberty Ventures we completed the spin-off of Liberty Expedia and received a $300 million distribution of cash which has been attributed to Liberty Ventures. With that, let me turn it over to Mark Carleton to discuss of our financials..

Thanks Greg. Let’s look a little bit at liquidity, at the end of the quarter the QVC Group had attributed cash and liquid investments of $348 million and around $6.5 billion in principal amount of attributed debt.

Note that after the end of the quarter, $345 million in cash was paid to holders of 1% exchangeable senior debentures that’s substantially all of those and that payment was funded by drawing on the QVC zulily bank credit facility.

Pro forma for this transaction QVC is total to debt to adjusted OIBDA as QVC’s credit agreement defines it was approximately 2.8 times this ratio now includes also zulily’s adjusted OIBDA as part of the refinancing that was announced in June. And now over to Mike for additional comments on QVC..

Thank you, Mark. Our Q3 results in the U.S. were well below our performance standards and consistent with what we had indicated in our prior earnings call. Partially offset by local currency sales gains in every non-U.S. market. We are responding to the immediate challenges of the U.S. to a series of actions which I will discuss momentarily.

We remain highly confident in the long-term health of our model. And we demonstrate that conviction with last week’s launch of Beauty IQ, our multi-platform network for beauty consumers.

As we discussed on prior calls and detailed in our press release, at the start of 2016 we begin allocating certain fixed cost for management reporting purposes differently between our U.S. and international segments. In this call, I’ll describe segment performance excluding the impact of these allocation changes. In the U.S.

revenue declined 6% in the quarter with 7% lower average selling prices and 1% lower volume. We experienced declines in beauty accessories, jewelry and electronics which were partially offset by gains in home and apparel.

We also benefitted from a significant improvement in return rates especially in accessories jewelry and apparel and to a lesser extent by favorable prior period returns adjustments. U.S. operating income decreased 22% while adjusted OIBDA and adjusted OIBDA margin decreased 10% and approximately 100 basis points respectively.

Product margins declined 140 basis points, primarily due to more aggressive clearance activity in jewelry and to a lesser extent clearance activity in apparel and accessories.

We also have 50 basis point increased in warehouse and freight cost primarily due to deleverage from the drop in average selling prices and the learning curve impacts from the launch of our Ontario, D.C.

Bad debt expense worsened by just 10 basis points that’s left in the 20 basis point potential impact with signals on our last call and the 100 basis point erosion we experienced in Q2. These pressures will offset, partially offset by a 70 basis point reduction in our inventory obsolescence expense.

As the team did a terrific job managing inventory levels in the tough environment and a 30 basis point improvement in Qcard income as we successfully increased activation and usage of the card. We reduced fixed and discretionary expenses by 4% we froze a lot of potential hiring and timely controlled other discretionary expenditures.

We also incurred lower incentive compensation and experienced favorable benefits, of benefits costs due to unusually low medical claim expenses. We'll likely face offsetting pressures in 2017 in these two areas. That's assuming we earn target levels of incentive comp and that our medical claims work to historic rates.

Partially offsetting these savings were $7 million in severance costs associated with the restructuring actions we announced in early September which resulted in your elimination of a number of physicians.

And consistent with comments on our last call we have reduced our planned CapEx spending to $185 million to $195 million for the full year that's down from our original guidance of $2.10 to $2.20.

In our international segment on a constant currency basis revenue increased 2%, we saw local currency gains in all the consolidated markets with particular strength in Italy. Our UK and German businesses generated record third quarter revenue. In Japan produced modest year-over-year growth for the first time since last Q3.

Our France business continues to ramp more slowly than anticipated and we're exploring options to enhance brand awareness and expand our product assortments as we move into 2017. International operating income decreased 5% while adjusted OIBDA declined 5% and adjusted OIBDA margin declined 114 basis points each on a constant currency basis.

These results were impacted by a few one-time challenges. The rapid devaluation of the pound following the Brexit vote contributed about $2 million of margin pressure. In addition we paid $3 million to terminate the long term baseball stadium naming right agreement that we had in Japan.

Finally we incurred an incremental $2 million in severance costs as part of our restructuring program.

Excluding these impacts our OIBDA margin in international was roughly flat with lower product margins, higher inventory obsolesence expense, and additional affiliate TV commissions offset by reduced customer service costs, strong fixed cost management, and anniversary in our France lodge.

On a consolidated total customer base, on the consolidated basis our total customer base grew 1% on a trailing 12 month basis to $12.7 million with the U.S. customer base extension to be flat at $1.8 million. We also saw continued progress on our digital platforms. Of particular note in the U.S.

e-commerce was 51% of revenue up more than 300 basis points. Mobile continued strong as well representing 59% total e-commerce orders, that's a 600 basis point increase and we focus most of my remaining comments on the drivers of the U.S. slowdown and the actions we're taking to return the business to normal growth rates.

Since our last call there had certainly been a great deal of speculation about whether the sudden decline we experienced in June reflected a structural change in the long-term outlook of our business or more short-term and addressable challenges.

We are confident it is the latter and while we're certainly not happy with the speed of the turnaround we are nonetheless encouraged by some positive trends we're beginning to see. We do believe this slowdown reflects the kind of perfect storm of unrelated challenges across a number of categories, coupled with difficult macro pressures.

In particular five underperforming categories, kitchen cook, electronics, jewelry, handbags, and hair care which represent about a third of our demand sales declined 24% year-over-year during the June to September time period.

In kitchen cook which had been a strength of ours, our premium kitchen electrics business, including brands like KitchenAid, Vitamix, Ninja, and Keurig, weakened significantly due to a lack of category innovation and the moderation in consumption trends in areas like coffee and juicing.

Declines in consumer electronics which has been a challenging category for us accelerated in mid year as we had to comp the Windows 10 launch from last year and we also pulled back Easy-Pay usage on extended assortments and electronics.

In jewelry another category with longstanding challenges, we chose to significantly pull back on new receipts and we are aggressively clear existing inventory to put ourselves in a better position for growth in 2017.

Our hand bag performance also had been strong eroded largely as the premium hand bag market has struggled and hair care, also strong growth driver in a high margin category. Our number one beauty brand, Wen is facing its challenges which led to a significant sales decline at QVC.

And while apparel continued to grow in the third quarter, it did decelerate significantly from the first half of 2016. On our last call we pointed to what appeared to be a weaker and more promotional department store environment as the potential driver of this decline.

While this is certainly a challenge, perhaps the bigger issue was that we simply weren't able to continue compounding the strong growth rates we've enjoyed recently in apparel, especially as we began anniversarying successful initiatives such as our expanded program need for our logo by Lori Goldstein brand and as newer brands we invested behind including Halston and C.

Wonder ramped more slowly than we anticipated and the liquidation of Liz Claiborne New York created short-term sales in margin pressures but in spite of those shortfalls our apparel business still grew 3% in Q3 ahead of the overall market.

Now against this tough back drop it is important to note that we had a number of businesses that were strong performers. In particular our floor care, bedding, mattresses, holiday decor, garden, and outdoor living categories were all up strongly and it's favorable industry trends coupled with the right products and offers drove outstanding results.

In short, while we always have one or two tough businesses in any given quarter, we can generally move airtime and other assets around to lien into what's working and stay within a relatively tight sales range.

Over the last few months, especially as our fashion business decelerated we simply didn't have enough strong performing categories to keep sales in positive territory.

In addition to these category pressures, we also believe that difficult geopolitical environment including a challenging election cycle that ends today depressed consumer sentiment, which disproportionately impacts the business like ours that lies on discretionary purchases.

Our mixed economic trends, the continuation of a highly promotional retail climate and the temporary Olympics viewership hit with also challenges. We also shared in Q2 that we began to see modest increases in write-off rates on our Easy-Pay program which caused us to take a more conservative stance on credit usage as we monitor these trends.

The impact of this change in credit practices has been in our view blown out of proportion by some. Our overall pullback in Easy-Pay usage was fairly limited. It is how we believe our real but modest impact on the overall slowdown.

That said, it had a bigger impact in areas like consumer electronics where we pull back Easy-Pay more sharply since electronics accounts for a disproportion at share of our bad debt. We continue to carefully monitor write-off trends.

They appear to at least we stabilized at this modestly elevated rate and they might be easy slightly although it's too early to draw a conclusion. With these challenges we can point to a number of positives that give us confidence that our issues are more short-term and addressable than long term and structural.

Our customer engagement is as strong as ever with TV viewership and web visits up over last year. Our customer retention is unchanged.

The average purchase frequency of existing customers is also largely unchanged with virtually all of the sales decline coming from a reduction in average selling price as the categories that are most challenged right now happen to be those are the highest average selling prices.

We also see no changes in consumer sentiment about QVC in any of our brand tracking or any indication of the change in competitive trends relative to Amazon. Nor are we seeing material impact from cord cutting.

And of course the continued strong performance of our international businesses reinforces our confidence in the underlying health of our business model. Now I'll shift to the actions we're taking to return the U.S. business to growth. We're focused on five critical priorities.

First and most importantly, getting back to driving more balanced growth across our categories. Second, executing the fundamentals flawlessly, consistently delivering perfect customer experiences and strong values. Third, accelerating new customer acquisitions.

Fourth, expanding our distribution reach and innovating next horizon shopping experiences and fifth, driving continuous improvements in our operating cost. And then I'll provide more insights on each of these priorities at Liberty's Investor Day on Thursday.

For now I'll just touch on some of the actions we're taking against the first priority to drive more balanced growth in key categories. In apparel and accessories we're focused on accelerating the growth of newer lifestyle brands like C.

Wonder and Halston, fill in assortment gaps and key trends like stretch denim with new brands Tinker Bell and Hot in Hollywood capitalizing on comfort trends with the successful global launch of our proprietary brand AnyBody as well as expansion of Cuddl Duds and Barefoot Dreams building credibility in a broader range of footwear categories including Euro casual and athletic outdoor with the launch of Merrell, Rockport and Puma diversifying our hand bag assortments and taking advantage of tremendous growth potential in luggage with brands like Lug, Scout and Travelon.

In beauty and most importantly, we need to stem the decline in hair care. We began comping the Wen declines late this year, we began comping the Wen declines late this year but we do expect further erosion but at a more modest level in 2017 before we're fully past it.

We are introducing a number of new hair care brands including Madam CJ Walker, Marula oil, Julien Farel and René Furterer and in total we are adding over 40 new brands across the beauty category in the first half of next year.

Areas of focus including accelerating growth with the next-generation of spa treatments and devices and for new Beauty IQ channel we now have a platform to more rapidly introduce the hottest new Indy brands and we have another 35 brands we're assessing for launch on Beauty IQ as early as Q1.

In jewelry, we hired a new category leader with a strong industry track record and while we have more to do, the stabilized the business and cleanup the assortments in the short-term, we're exploring a number of actions to get into a growth mode over the midterm including expanding the launch segment, adding new fashion jewelry lines along with select proceed brands, improving our agility and responding to trend product, and winning in special occasion by leveraging our Diamond Ring, Affinity Heritage.

In home we're focused on getting kitchen cooked back to growth by maximizing emerging trends such as copper cookware and air fryers, adding premium cookware lines with Le Creuset and All-Clad expanding storage and organization offerings with Lock and Lock and capitalizing on innovative new cook models, food models like Blue Apron launch we had in Q3 that’s the subscription food service.

In consumer electronics we anticipate moderating the decline in PCs and tablets, leveraging new special finances offers through our private label Qcard to enhance our value proposition and expanding into new brand and subcategories like Amazon Fire and All-in-one and touch PC.

And we'll continue to jump on emerging trends such as our success with Amazon Echo Dot and Tap. So let me close this discussion by acknowledging the question that all of you were thinking on how long will it take to get back to normal growth rates and stable OIBDA margins.

Given the varying timeliness for each of the actions I've described coupled with the general uncertainty about the consumer, it's hard to answer that question with any great precision. We fully anticipate that we will have ups and downs in this recovery. But generally we expect it's a matter of quarters rather than months or years.

We're encouraged but certainly not satisfied with recent trends. At quarter to date in Q4, sales declines have moderated into the low to mid single-digits. We also anticipate the product margin erosion we saw in Q3 will moderate as we start to reduce clearance activity in Q4 and through early next year.

And the added fixed cost to our new Ontario DC should be largely offset boy freight savings over the course of 2017. I'd also note this quarter to date disclosure is provided as an exception given our recent performance. Our intent is to go back to our normal disclosure practices beginning with our next quarterly earnings call in February.

Finally I do want to highlight two major launches that reflect our commitment to being an innovator in our space and investing smartly behind long-term growth initiatives. Last week we launched beauty IQ the world’s only live multi-platform network dedicated to beauty.

This network is accessible through a third TV channel in the US with an initial reach in excess of $40 million and also through beauty IQ.com, QVC.com. QVC’s mobile app and social channels Facebook and Instagram. The network features beauty content 24/7 with four hours of live programming five days per week at the start.

The dedicated program host will feature more than 50 prestige brands including Givenchy, IT Cosmetics, Edward Bess, Tarte, tatcha, Becca, Peter Thomas Roth, Josie Maran and Nest. Last week we also significantly expanded our OTT platform with Roku.

Viewers can now watch all three channels, QVC, QVC Plus and Beauty IQ on Roku along with featured best of programs from the prior week and a large change in inventory of one to two minute on-demand videos designed to engage current and we hope new customers.

As part of our new agreement with Roku, we'll get advantage channel placement and promotional support and we see this as just the beginning of reimagined QVC in an over the top live and on-demand environment. Thanks and we look forward to seeing you at Liberty’s Investor Day on Thursday when we go through these initiatives in more depth.

And with that, I’ll turn it over to Darrell to discuss zulily's Q3 results..

Thanks Mike. And thanks everyone for joining today’s call. Our third quarter results were solid and I'm pleased with the growth we saw on a more challenging quarter comparable to last year. Third quarter revenue came in at $359 million up 14% year-over-year on top of 10% year-over-year growth last year.

Operating loss was $52 million for the quarter, primarily as a result of approximately $60 million of amortization of intangible assets recognized in purchase accounting. Adjusted OIBDA came in at $18 million up 20% on top of 150% growth last year.

As a reminder one year ago our 2015 third quarter revenue accelerated 10% growth year-over-year up from 4% in the second quarter. Since the second quarter of last year we've demonstrated a strong double-digit growth and I'm pleased with our teams focus on execution on delivering an amazing customer experience each and every day.

As Mike mentioned, we continue to collaborate with QVC and share a tremendous amount of knowledge between our two businesses. I continue to be excited about the partnership opportunities and dozens of programs and tests we’ve been able to run just one year since the deal closed.

We look forward to sharing more about our progress and key findings from the last year at Liberty Investor Day later this week. Turning to the core businesses, today I'll cover three key areas. First, on our customer experience, second on marketing and our plans for new customer growth and third on profitability and our long-term outlook.

First we continue to focus on our customer experience. In merchandising, we've expanded our product offerings and brought on many new well known household brands such as Burton's, Carter's, Rubbermaid as well as many more smaller boutique brands.

We also continue to deepen our category offerings in area such as health and beauty, wearables and customized products and we see our customers responding to this expanded offering.

We've also deepened our exiting brand relationships leveraging our nearly 5 million social media followers and engaging millions through e-mails and push notifications delivered every day. Customers are also continuing to engage more with us on mobile devices. 56% at Q3 total orders came from mobile up from 59% a year ago.

Fresh products at great value with a unique and entertaining site experience remain the fundamental growth drivers of our business. Second on marketing, as we continue to look to 2017 and beyond, we remain focused on expanding our new customer base.

Last year, we made a strategic shift in the broad based marketing channels with a focus on acquiring customers with a higher lifetime value. We made progress on driving up the volume of quality customers and are continuing to focus on opportunities for driving volume of new customers.

Over the last quarter we focused on expanding channels such as search and social media as well as off line with the launch of a new TV campaign.

We've also greatly expanded the volume of non-owned inventory that can ship in one to two days through programs such as consignment and our third-party fulfillment services offering, vendor fulfillment services or VFS.

We're very excited to see continued success with vendors who are participating in VFS, and the significant growth in volume available to sell in zulily over the last few quarters.

Our recent growth in VFS, will allow us to ship more products closer to Christmas day than in previous years, which will help open up zulily to a broader set of customers and we believe incremental wallet share with our existing customers.

Overall we've earned a tremendous amount this year and I'm eager to keep developing our team, skills and approach so we can lean further into customer growth in 2017. Third, I want to highlight our view on profitability and our long term outlook.

Our adjusted OIBDA grew 20% year-over-year faster than revenue but at a slower rate than previous quarters. Its important to note that our OIBDA margins are typically lower in Q3 than in Q4 as a result of our seasonal ramp for the peak holiday season.

In addition, our investment in supply chain technology and process improvements have been the primary driver of our recent surge in profitability. Since 2014 we saw significant cost savings in gross margins over time. Particularly in the second half of 2015 as we comped redundancies in our fulfillment network.

I believe we’ll continue to gain efficiencies and see strong profitable growth. Although, not necessarily at the triple digit growth rates we’ve seen in the last year.

As we invest more in technology automation and process improvements in our supply chain and leverage our fixed cost from scale, I firmly believe we'll continue to drive OIBDA margin expansion over time.

I remain incredibly excited about the growth we've seen this year and look forward to building on that momentum into the holidays next year and beyond. With that, let me turn the call back over to Mark..

Excellent. Thanks, Darrell. On to the Liberty Ventures liquidity situation at the end of the quarter the group had attributed cash and liquid investments of $157 million and a short $2 billion in principal amount of attributed debt.

The value of the public equity method securities and the other public holdings attributed to the group was $6.3 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 primarily Expedia split-off and the related cash distribution those are covered in more detail in our press release. Now back to you, Greg..

Thank you to Mike, Darrell and Mark to the listening audience we appreciate your continued Liberty Interactive we hope to see many of you on Thursday in New York at our Investor meeting. If you haven't registered yet please do so using the link on our homepage. With that operator, let me open up for questions. Thank you..

Your first question comes from the line of Heather Balsky with Bank of America..

Hi, good morning. Thank you for taking my question. I guess if you could go back to talking about on Easy-Pay and the impact from Amazon, I know there has been a lot of investor worries about those, and maybe you can elaborate on why you don't think those have been – what’s driving slowdown recently.

And then also Darrell you mentioned that it was a challenging quarter as well.

I'm curious when you look across the business holistically, what you saw at zulily that gives you insight into what happened maybe this quarter at QVC?.

So I’ll take the QVC question first and then turn it to Darrell. On Easy-Pay usage – our pullback was relatively modest. We kept the penetration of Easy-Pay about the same and slight reduction in kind of average number of payments that we offered our customers.

And as I mentioned, in some places we are a little more conservative like consumer electronics and there's no question that’s some of the decline in consumer electronics by no means, all of it, was driven by that more conservative usage.

But there's been interim analysis, this tight correlation between Easy-Pay and our sales, and that correlation is simply not that strong. We use it strategically, we pulled it back slightly. The areas where we had pressure weren't highly correlated necessarily with a pullback in Easy-Pay. So I certainly think it was a factor in our Q3 performance.

I think if we were really aggressively increasing Easy-Pay usage, I'm sure we would have grown faster than we did. But I don't think by moderating the usage that had a huge driver of the decline that turn our analysis tells us.

Since we have seen the write-off rates moderate, since the bad debt impact is pretty limited as I mentioned, we are being a little more liberal in the use in Q4 not dramatically, so, but loosening up a little bit as we monitor these trends. And so I think it’s a factor on the margin just not something I would view as a primary driver.

On Amazon, we just kind of – can't find any evidence that there was some particular Amazon effect that all of a sudden hit us in June. They are powerful competitor. Our shoppers cross shop at Amazon all the time.

Our own data in terms of their propensity to shop at Amazon, in terms of what categories they shop at Amazon for, in terms of what they tell us kind of qualitatively, and focused groups kind of none of that points to any change in trend.

So we have great respect for Amazon, they are a real competitor for sure, but it just doesn’t feel like there was any sort of change in trend that would speak to kind of results we saw in the June and onward time period.

Whereas, we can’t look at these kinds of specific pressure points at various categories, some of the macro pressures, those have been correlated tightly to our performance but we can't find any sort of Amazon effectively suggest there's something unusual going on there. Darrell, I'll let you answer the other..

Sure. Yes. Heather, I mean if I look at the quarter, I would say – I wouldn't say it was a changing quarter, I think I feel good about the execution in the quarter and the growth. I think we had a challenging comp to deal with there.

But I think overall we're continuing to do a lot of experimentation, a lot of work with the QVC team kind of learning from their lessons over the last 30 years there that I think can help us – continue to help us over time. And then just a huge focus on marketing.

I know we continue to stay very, very focused on marketing and driving kind of new customer growth in our focus there. So I wouldn't say challenging, but that's core kind of where our focus is..

Great. Thank you very much..

Your next question comes from the line of Eric Sheridan with UBS..

Thanks for taking the question and thanks for all the detail in the prepared remarks. I think that was pretty helpful to folks. So Mike, maybe we could turn to customer growth, how you’re thinking about customer growth in the U.S.

business, where it is trajected as we move through this year and sort of what the sort of incentives or initiatives needed to put in place as we turn the page on 16 and go to 17 when you think about customer growth primarily in the U.S. business? Thanks so much for the detail..

Yes. Thanks, Eric. So I would say customer growth was roughly flat in Q3, so we quite frankly felt good about the fact that in a tough quarter we were able to keep customer file stable. If you look underneath that active customers or existing customers I should say we’re up a little bit and new customers were down a little bit.

And so we feel very good about the health of the existing customer base and are confident that their retention is strong, we're confident that their growth will resume with us as we continue to work on creating new opportunities to drive excitement and energy into these categories that are struggling.

With new customers we've kind of been – for the last – haven’t had a few years of really strong growth in new customers that growth has certainly softened in the last year partly because the categories that are weakest for us, our categories that tend to appeal more to new customers like electronics, kitchen and hair care, and also because we were comping sort of the big additions we did with distribution both Q plus and OTA.

So as we look forward we want to get that new customer growth back on a very strong growth path. I think the combination of our launch of Beauty iQ, stabilizing some of these performance trends in areas and categories that do appeal more to new customers.

Other things we are doing from a marketing standpoint, we're offering some kind of incentives to new customers based on some successful pilots we ran in Germany and Italy that we've now brought to the U.S.

So, all those things together, both just comp being – getting past a tough comp as well as these other initiatives I think will get us back to good growth in new customers. Among the various things that I'm encouraged about kind of quarter to-date is that our new customer growth has been good quarter-to-date.

So, again, I don't want to read too much into several weeks, but it's a sign that I think we're on the right track and we'll be back to good solid growth in the customer base..

Your next question comes from the line of Ed Yruma with Pacific Crest Securities..

Hey, guys. Thanks very much for taking my questions.

I guess, first, not to draw too fine of a point behind it, but the kind of increase sequentially in Easy Pay, is it fair to assume that you're going to use Easy Pay equally this fourth quarter as you did last year? Second is another follow-up, given your experience of the WEN – I know you've also done a great job incubating new beauty brands, are you taking any different procedure or process around understanding safety and efficacy? And how you're going to help some of these emerging brands deal with some issues that they may face? Thanks..

Yeah. So, on Easy Pay usage, I think it's probably a fair assumption that Easy Pay usage are probably broadly stable Q4 this year to Q4 of last year.

I am so proud on the second question and every vendor tells us it sets us apart from every other retailer they work with and that's the rigor of our quality control process, the rigor of validating in claims that are made, our legal review process.

And for obvious reasons, I don't want to get too deep into the WEN issue other than to say that the products that were the original source of complaint are not products we sold. We're not seeing any material set of customer issues with these products.

I'll let WEN sort of challenge whether or not that complaints have any merit, but again, they weren't even on our products. So that's a tough situation. It's been tough for WEN that – but we feel really good and proud about the rigor we put into our claims process.

Quite frankly, I think it hurts us from time to time, as our advisor remind us because we're so conservative about what will stay on air and what products are allowed to get through our filter. So I think that’s one thing that we’re surely strongly for us..

Great. Thanks so much..

Your next question comes from the line of James Ratcliffe with Evercore ISI..

Good morning, thanks for taking the question. Two if I could on ventures. First of all can you give us an update on where are green energy investment stand and your thoughts on if there are potential additional opportunities there and how things have been going thus far.

And second, in the IRS had some discussions I guess that it’s a proposed rule making about limiting section 355 spins. If those rules going to affect how does that change the landscape for structural changes going forward. And does it – the potential of those change or thoughts on timing. Thanks..

So I’m going to ask Albert to comment on both..

In connection and then I’ll go in reverse order in connection with the spins-off. We have a there is a noticeable proposed rule making that’s outstanding. We think by and large it’s imposes additional criteria, we appreciate the fact that it was clarity around what the requirements are around during the spins.

And I think it’s a situation that if there is other things that we need to do we’ll make sure that we’re in compliance with the existing rules. By knowing what those rules are is better than not knowing what they are.

And I think that they’ve actually gone back in some regards in terms of some of rigger around the size of the ATV and other things from the notice to the proposed regulations that are outstanding.

So its – we’ve been able to kind of do these things for a long period of time, we expect to be able to do these things going forward to the extent they make sense.

On the green energy investments they all are moving along we have a little bit of an increase with respect to our upcoming call this year, productions up, we bought an incremental interest there.

And so that one is doing well, the Abengoa situation which related to our Solana parabolic solar field it looks like Abengoa will be able to not file a bankruptcy there are certain claims from the project against Abengoa that would be a benefit to us.

Essentially to the extent any of those make wells and get fulfilled that effectively creates additional equity for Liberty..

Great, thank you..

Your next question comes from the line of Tom Forte with Maxim Group..

Great. Thanks for taking my question. So Mike George just wanted to know what your current thoughts where on shipping and handling and plans to potentially ramp it up or ramp it down for fourth quarter holiday. Thank you..

Thanks, Tom. So no plans really to do anything differently with shipping and handling as we shared when we put in place our kind of reduced rates year and a half ago, we thought that put us in a solid position that we could stick with. So I would tell you its really something we watch all the time, listen to customers monitor their behavior.

And so its one you could never say you are finished with, right now the plan is clearly to largely kind of whole path where we are with shipping and handling rates and sort of generally speaking the comp frequency of shipping and handling promotions.

We certainly don’t see that going up over time, shipping and handling going up over time to the extent that we need to further lower over time, we’ll kind of do that in a way that we can offset it with other cost savings. So we’re very focused as well on a number of initiatives to lower our cost of fulfillment.

So that if to the extent that we do need to be a little more aggressive on shipping and handling we’ll have ways to kind of cover that in the P&L. So that’s our current plan something we monitor carefully but in the short-term we are largely stable..

Great, thank you..

Your next question comes from the line of Alex Fuhrman with Craig-Hallum Capital..

Great. Thanks for taking my question. Just as a follow-up, I guess, to Tom's question there, I'd be curious, given that you typically don't offer a lot of free shipping, but you were doing during the month of August free shipping on your TSVs.

I'd be curious to what – what kind of a response you got from your customers there during the month and how that informs your thinking? And then, just a quick question on your customer file. Obviously, the growth you talked about there had been sort of slowing throughout the year.

Is that being driven more by more attrition within the file or just fewer new customers? And I'd be curious if – are there any particular categories that maybe had been pulling more of their weight in terms of bringing new customers in or who haven't or if that has been pretty much uniform across the board this year?.

Yes. Thanks, Alex. So, on the first one on kind of August S&H promotions on TSVs, we do periodically spend in on the item and promote free shipping and handling on TSVs. We probably did a little more of that in Q3, but I wouldn't say dramatically more.

Customer absolutely responds, so there is no question that shipping and handling promotions are a powerful lever. You generally don't usually increase your revenue, which you don't get even on OIBDA. But when we think it makes sense, we'll do it.

We tend to try to build it into the upfront plan, so rather than just layer it on at the end, it's something we work collaboratively with the vendor on. We often get the vendor to fund that shipping and handling promotions. And I think the last count maybe about a quarter of our total sales go out the door with no shipping and handling charge.

So we do think – well, that's because it's included in the purchase price all the time or because of something like a TSV offer. So it's a powerful lever. We just want to use it carefully and also make sure we don't create any remorse because we offer a sale one day and the customer doesn't get it the prior day.

On the customer file, what we've seen in the customer file broadly over the last 12 months, and I'm speaking specifically to the U.S., has been just as outstanding growth in the existing customer base. That outstanding growth moderated to kind of flat in Q3 from very strong.

And naturally a tale of the apparel business growth moderated, existing customer that's what she keeps coming back for every day. So, in a sense, that mirror that kind of slowing of apparel. With new customers, we still bring in a lot of new customers.

But we did see, as I mentioned earlier, a modest decline in new customer growth over the last 12 months, largely because of the decline in categories like electronics, kitchen cook and hair care. Those were all very highly penetrated with new customers, as well as anniversarying some expanded distribution.

So, I think through all of that, we basically were kind of flat in Q3, a little bit down with new, slightly up with existing, just not up as much as before, no change in retention rate so no attrition issues at all.

And I think as we start to get to more balanced growth across categories, we will see – we think we can drive balanced growth across both existing and new customer segments. Add to that the fuel of Beauty iQ as we really ramp up that opportunity and we would anticipate seeing the customer file return to solid growth..

Great. That's helpful. Thank you very much..

Thanks..

Your next question comes from the line of Barton Crockett with FBR Capital Markets..

Okay. Thank you for taking the question. I wanted to focus a little bit more on the change in the trends. You guys on the second quarter were talking about the high single-digit declines in the U.S. in July and start of August. Now you are saying so far in Q4 that you are down low to mid single-digits in the U.S.

What drove the deceleration in the downward trajectory there?.

You're asking what drove the kind of relative improvement we're seeing in Q4, was that the question?.

Yeah. Yeah, exactly.

What got better or got less bad?.

So, I would say the fashion business has got moderately better, accessories in particular. I would say beauty got moderately better, electronics got better, and we had some very successful TSVs on products like Amazon Fire and as well as Echo.

So sort of generally kind of – and I'll say the erosion in kitchen and cook moderated, still challenging, but moderated. Those are probably the bigger swings. Improvement in electronics, a bit of improvement in accessories and beauty, a little bit of moderation of the pressure in kitchen cook.

Jewelry remains highly challenged probably as bad or even weaker than in Q3 and, again, we're just simply not bringing in new goods in that category and are trying to be very disciplined on working through our issues..

Okay. That's helpful. And then another thing I was curious about the television environment, clearly the election's been a big focus in October until today. That's going to change tomorrow going forward hopefully.

Can you quantify or give us some gut feeling of how big of a impact headwind that has been so far in Q4?.

I really can't. It's just hard for us to tell.

Our gut has been that there is this sort of – when it comes to an entertainment-oriented shopping channel, highly discretionary purchases that it just feels to us, as we look at the performance of like items year-over-year that there's this sort of general malaise that's affecting everything in addition to the specific issues I called out.

How much of that is specific to the elections and how much will that go to that base as soon as the elections are over, I honestly just don't know. As we've shared in the past, we've been actually encouraged that our viewership has stayed solid. So she's still taking the time to watch, just a little less motivated to buy.

I'd love to think that that gets better quickly, but I'm certainly not ready to bet on that and I think we just have to sort of take that day by day. I don't honestly think that there's going to be sort of a miraculous change in consumer psyche sort of a day after, but yeah, it's guesswork..

Okay. I'll leave it there. Thanks a lot..

Thank you..

Your next question comes from the line of Jason Bazinet with Citi..

Can I just ask a question on Liberty Ventures and Liberty Expedia? I guess, one thing that I didn't realize till after the fact.

Since you have a voting control inside Liberty Expedia, was it necessary to put an active trade or business like bodybuilding in that spin or split-off or was that a choice?.

Jason, that really goes to the question of whether it was a good asset, but they're still – and not as bundled security, which is sort of the problems like Yahoo! had, but it still does not obviate the need for an ATV..

It does not. Okay. Thank you..

Your final question comes from the line of Matthew Harrigan with Wunderlich Securities..

Thank you. I actually had two. One, there's been some remarkably public pushback from some of the European couture houses and getting approached by Amazon as fashion business. I mean, you've always been perceived as a very good partner, but now you're really in, I guess, up to your neck on Beauty iQ with some of your partners there.

I mean, how do they feel about the effects on the rest of their sales? I mean, that's a pretty vibrant category in retailing. And then the second question is, it's still early, but a lot of excitement about 4.5G on the way to 5G and all the possibilities for retailing there and clearly you're sitting on a huge bank of video retailing content.

Thank you..

Thanks, Matthew. Yeah. So, on Beauty iQ, we just have been sort of overwhelmed by the response of both existing vendors and potential new vendors to this opportunity. I mean, there really is no – forget in the shopping space, just in general, there is no other beauty network.

And I encourage everyone to watch it when we're – especially when we're live, which is Wednesday through Sunday evenings. It feels very different from QVC, it feels it has as much more contemporary vibe, a little bit more like kind of beauty bloggers on YouTube.

It's a way to really kind of imagine QVC for another generation and to take this very dynamic growing area of beauty and present it in a different way. So, the vendors are thrilled about it, they're thrilled about having this different environment to complement the QVC main environment, and we think we can grow beauty across both platforms.

So just a huge opportunity that we're excited to build on in the coming years. On 5G, it is early to know exactly what it's going to mean for us.

I would just sort of maybe broaden the question and say, when you think about all the changes in the digital media, communications landscape from 5G to the real expansion of true interactivity on a set-top box, there's just so many more way – to Facebook Live, there's just so many more ways for us to engage with the customer to present something to her that's compelling kind of where ever she is, to enable her to interact with it.

The test we have with – we're going to get amazing data from Roku about how people interact with on-demand content from QVC in addition to live content.

So you just go through that list of more and different ways to get high quality video out there streamed across different kinds of devices with high levels of interactivity, and I think we're just kind of in early innings of imagining what all of that could be..

Thanks, Mike..

Great. And thank you to all of our listening audience. As we said, we appreciate your interest in Liberty. We look forward to seeing you soon perhaps in New York or if not next quarter on this call. Thank you..

Thank you. This does conclude today's conference call. You may now disconnect..