QVC Inc.
04/15/2026 | Press release | Distributed by Public on 04/15/2026 15:25
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our consolidated financial statements and the notes thereto.
A discussion of our results of operations for the year ended December 31, 2024 is included in the "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-QVC Consolidated" section in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") at http://www.sec.gov.
Chapter 11 Proceedings
Voluntary Filing under Chapter 11
On the Petition Date, the Company Parties intend to commence the Chapter 11 Cases under the Bankruptcy Code in the Bankruptcy Court. As of the Petition Date, we intend to operate our businesses as a debtor-in-possession under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. QVC Group and QVC, Inc intend to request approval from the Bankruptcy Court for a variety of "first day" motions to continue our ordinary course operations during the Chapter 11 Case.
Commencing the Chapter 11 Cases will constitute an event of default that accelerates the Company Parties' respective obligations under the Debt Instruments. The Credit Facility and the QVC Notes provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. The exchangeable senior debentures provide that the amount accelerated is the greater of (x) the current principal amount of the exchangeable senior debentures or (y) the market value of the reference shares, plus all accrued and unpaid interest and all pass-through distributions due with respect to the reference shares shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments will be automatically stayed as a result of the Chapter 11 Cases, and the stakeholders' rights of enforcement in respect of the Debt Instruments will be subject to the applicable provisions of the Bankruptcy Code, including the Automatic Stay. For additional information, including information on the Automatic Stay and other protections and the NYSE delisting, Refer to Item 1.
Overview
QVC, Inc. and its consolidated subsidiaries (unless otherwise indicated or required by the context, the terms "we," "our," "us," the "Company" and "QVC" refer to QVC, Inc. and its consolidated subsidiaries) is a retailer of a wide range of consumer products, which are marketed and sold primarily by merchandise-focused televised shopping programs, the internet and mobile applications. QVC is comprised of the reportable segments of QxH, which includes QVC-U.S. and HSN, Inc. ("HSN"), and QVC-International. These segments reflect the way the Company evaluates its business performance and manages its operations.
In the United States ("U.S."), QVC's televised shopping programs, including live and recorded content, are distributed across multiple channels nationally on a full-time basis, including QVC, QVC2, QVC3, HSN and HSN2. The Company's U.S. programming is also available on QVC.com and HSN.com, which we refer to as our "U.S. websites"; social platforms (including TikTok, Instagram and others); virtual multichannel video programming distributors (including Hulu + Live TV, DirecTV Stream and YouTube TV); applications via streaming video (including Facebook Live, Roku, Apple TV, Amazon Fire, Xfinity Flex and Samsung TV Plus); and mobile applications (collectively, our "Digital Platforms").
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QVC's Digital Platforms enable consumers to purchase goods offered on our televised programming, along with a wide assortment of products that are available only on our U.S. websites. Our other Digital Platforms (including our mobile applications, social media pages and others) are natural extensions of our business model, allowing customers to engage in our shopping experience wherever they are, with live or on-demand content customized to the device they are using. In addition to offering video content, our U.S. websites allow shoppers to browse, research, compare and perform targeted searches for products, read customer reviews, control the order-entry process and conveniently access their account.
Internationally, QVC's televised shopping programs, including live and recorded content, are distributed to households primarily in Japan, Germany, the United Kingdom ("U.K."), and Italy. In some of the countries where QVC operates, QVC's televised shopping programs are distributed across multiple QVC channels: QVC Style and QVC2 in Germany and QVC Beauty, QVC Extra and QVC Style in the U.K. Similar to the U.S., our international businesses also engage customers via websites, mobile applications and social media pages. QVC's international business employs product sourcing teams who select products tailored to the interests of each local market.
The Company's Japanese operations ("QVC-Japan") are conducted through a joint venture with Mitsui & Co., LTD ("Mitsui"). QVC-Japan is owned 60% by the Company and 40% by Mitsui. The Company and Mitsui share in all profits and losses based on their respective ownership interests. QVC-Japan paid dividends to Mitsui of $44 million and $51 million in the years ended December 31, 2025 and 2024.
The Company is an indirect wholly-owned subsidiary of QVC Group. QVC Group is a portfolio of brands including Cornerstone Brands, Inc. ("CBI"), as well as other minority investments.
Strategies and Challenges
The goal of QVC is to extend its leadership in video commerce, e-commerce, streaming commerce and social commerce by continuing to create the world's most engaging shopping experiences, combining the best of retail, media, and social, highly differentiated from traditional brick-and-mortar stores or transactional e-commerce. QVC provides customers with curated collections of unique products, made personal and relevant by the power of storytelling. We curate experiences, conversations and communities for millions of highly discerning shoppers, and we also reach large audiences, across our many platforms, for our thousands of brand partners.
As of December 31, 2025, QVC's net leverage ratio, as calculated under the Credit Facility, was greater than 4.5 to 1.0. Under the terms of the Fifth Amended and Restated Credit Agreement, this constitutes a breach of the financial covenant. Without a waiver under the Fifth Amended and Restated Credit Agreement, the lenders have the right, but not the obligation, to accelerate the loans and demand repayment from QVC for noncompliance with the net leverage ratio debt covenant; however such acceleration cannot occur until certain conditions are satisfied, including the expiration of a cure period during which QVC may take remedial action to cure the breach.
Under the indentures governing the senior secured notes, a default under the Credit Facility will only constitute an event of default under the indentures, and thus trigger the right, but not the obligation, of the noteholders to accelerate the senior secured notes and demand repayment if (i) the Credit Facility has been accelerated, (ii) there is a payment default under the Credit Facility or (iii) there is a foreclosure on collateral securing the Credit Facility. Accordingly, acceleration of the senior secured notes is not automatic upon a breach of the Credit Facility covenant; it is contingent upon the occurrence of one of these specified events under the Credit Facility.
The outstanding principal associated with the Credit Facility and senior secured notes is $5,046 million. As a result of the above-noted net leverage ratio and the maturity date of the Credit Facility, outstanding balances have been classified as a current liability in the consolidated balance sheet, as of December 31, 2025.
Additionally, as noted above in Item 1, on the Petition Date, commencing the Chapter 11 Cases will constitute an event of default that accelerates the Company Parties' respective obligations under the Debt Instruments. The Credit Facility and the QVC Notes provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. The exchangeable senior debentures provide that the amount accelerated is the greater of (x) the current principal amount of the exchangeable senior debentures or (y) the market value of the reference shares, plus all accrued and unpaid interest and all pass-through distributions due with respect to the reference shares shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments will be automatically stayed as a result of the Chapter 11 Cases, and the stakeholders' rights of enforcement in respect of the Debt Instruments will be subject to the applicable provisions of the Bankruptcy Code, including the Automatic Stay.
As a result of the risks and uncertainties associated with our Chapter 11 Cases, we cannot accurately predict or quantify the ultimate impact or timing of events that occur during our Chapter 11 Cases and the impact that those events will have on our
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business, financial condition and results of operations. Therefore, there remains substantial doubt about the Company's ability to continue as a going concern.
On June 27, 2022, QVC Group announced a turnaround plan designed to stabilize and differentiate its core QVC-U.S and HSN. businesses and expand the Company's leadership in video streaming commerce ("Project Athens"). During 2022, QVC commenced the first phase of Project Athens, including actions to reduce inventory and a planned workforce reduction that was completed in February 2023. QVC recorded restructuring charges of $13 million during the year ended December 31, 2023 in restructuring, penalties and fire related costs, net of (recoveries) in the consolidated statement of operations. These initiatives were consistent with QVC's strategy to operate more efficiently as it implements its turnaround plan.
During the second quarter of 2024, QVC entered into an agreement and announced a plan to shift its global operating model for IT services to a managed services model. As a result, during the year ended December 31, 2024 QVC recorded restructuring charges of $18 million in restructuring, penalties and fire related costs, net of (recoveries) in the consolidated statement of operations. The cash payments associated with this restructuring were substantially complete as of December 31, 2025.
On November 14, 2024, QVC announced a transition to the WIN strategy, targeting top-line growth through three central priorities: (i) 'Wherever She Shops' - aims to enhance customer interactions across diverse platforms; (ii) 'Inspiring People & Products' - fosters rich, engaging content experiences; and (iii) 'New Ways of Working' - emphasizes leveraging technology and process enhancements to streamline operations and fuel innovation. With the WIN strategy, QVC plans to broaden content outreach by creating dynamic, purpose-built experiences that resonate across social media and digital streaming channels. By optimizing our production studios and fostering continuous improvement, we envisage content creation as an integrated, efficient process that adapts to various platforms without losing the essence of our brand. We aim to grow audiences and redefine shopping experiences, ensuring that we meet our customers wherever they are while building on our heritage for sustained success.
On January 29, 2025, the Company announced the consolidation of its QVC and HSN operations at QVC's Studio Park location in West Chester, PA, and the closing of the St. Petersburg, FL campus. The consolidation is part of QVC's organizational and strategic changes intended to support its WIN strategy. As a result, QVC accelerated depreciation related to the closure of the St. Petersburg, FL campus, which was completed as of September 30, 2025 (the "Completion Date"), and recorded $45 million of incremental depreciation in 2025 through the Completion date. On March 27, 2025, QVC announced a plan to reorganize teams across the Company as part of the WIN strategy, which is intended to increase revenue through growth initiatives while maintaining Adjusted OIBDA margin. As a result of the reorganization, QVC recorded $34 million and $19 million of restructuring charges at QxH and QVC International, respectively, during the year ended December 31, 2025 in restructuring, penalties and fire related costs, net of (recoveries) in the consolidated statement of operations. During the year ended December 31, 2025, the Company paid $37 million related to these charges.
In September 2025, QVC entered into agreements to sell the St. Petersburg properties to independent third parties. Two of the St. Petersburg property sales closed in December 2025. The sale of the remaining property is expected to be completed within the next twelve months. As of December 31, 2025, the remaining long-lived assets of $17 million, all within QxH, were included in assets held for sale noncurrent in the consolidated balance sheet.
In August 2025, the Board of Directors (the "Board") of QVC Group implemented a revised compensation structure for QVC Group's senior executives (collectively, the "Senior Executives") and a large number of existing participants in QVC Group's incentive compensation programs (together the "Eligible Employees").
•QVC Group has determined to guarantee to each Eligible Employee who remains employed through the end of 2026 cash payments generally equal to the following: (i) for certain senior executives, 50% of their target variable compensation for 2025 and 100% of their target variable compensation for 2026, and (ii) for all other Eligible Employees (except the Senior Executives), 50% of their target variable compensation for 2025 and 2026 (the payments described in (i) and (ii), the "Guaranteed Compensation"). With the exception of the Senior Executives as described below, 25% of the 2025 Guaranteed Compensation related to all other Eligible Employees was substantially earned and paid as of September 30, 2025, with the remainder earned and paid as of January 2026. Additionally, the 2026 Guaranteed Compensation for all other Eligible Employees, with the exception of the Senior Executives as described below, will be earned and paid on a quarterly basis through the end of 2026.
•To ensure that the Senior Executives are motivated to achieve important operational goals of the Company, a portion of their Guaranteed Compensation is subject to meeting certain performance conditions.
•All other Eligible Employees (except the Senior Executives) remain eligible to earn the portion of their annual bonus that is not part of the Guaranteed Compensation.
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•To provide a stronger retention benefit to certain employees, the Company has agreed to prepay (i) the Guaranteed Compensation for the Senior Executives and (ii) existing retention benefits for other specified employees (including the Senior Executives). Prepaid compensation to Senior Executives will be subject to repayment on an after-tax basis if certain employment and, as applicable, performance conditions are not satisfied.
As a result of this compensation change the 2025 restricted stock grants and a portion of a 2025 performance award grant were canceled. Additionally, the expense associated with the impacted awards (the 2025 restricted stock grants and a portion of a 2025 performance award grant) will no longer qualify as stock-based compensation expense, beginning in the fourth quarter of 2025.
On September 23, 2025, an amended and restated certificate of incorporation (the "A&R COI") and amended and restated bylaws went into effect. The A&R COI provides, among other things, that subject to certain governance rights of the sole stockholder of the Company, the business and affairs of the Company will be managed by, or under the direction of, a Board of Directors.
Trends
QVC's future net revenue will depend on its ability to grow through Digital Platforms, retain and grow revenue from existing customers, and attract new customers. QVC's future net revenue may also be affected by (i) the willingness of cable television and direct-to-home satellite system operators to continue carrying QVC's programming service; (ii) QVC's ability to maintain favorable channel positioning, which may become more difficult due to governmental action or from distributors converting analog customers to digital; (iii) changes in television viewing habits because of video-on-demand technologies and internet video services; (iv) QVC's ability to source new and compelling products; and (v) general economic conditions.
The current economic uncertainty in various regions of the world in which our subsidiaries and affiliates operate, has impacted and could continue to adversely affect demand for our products and services since a substantial portion of our revenue is derived from discretionary spending by individuals, which typically falls, to varying degrees, during times of economic instability and inflationary pressures. Economic tensions and changes and uncertainty relating to international trade policies, including, for example, the recent widespread tariffs announced by the U.S. on its major trading partners, higher tariffs on imported goods and materials, actions taken in response (such as retaliatory tariffs or other trade protectionist measures or the renegotiation of free trade agreements), have increased inflationary cost pressures and recessionary fears. In February 2026, the U.S. Supreme Court struck down the sweeping tariffs that the U.S. government had imposed through the executive orders issued pursuant to the International Emergency Economic Powers Act. Shortly thereafter, the U.S. government issued a series of orders to comply with the ruling, while also announcing new temporary tariffs for a 150 day period beginning February 24, 2026. Tariffs and international trade arrangements will continue to change, potentially without warning and to an extent or duration that is difficult to predict. Global financial markets have experienced and may continue to experience, disruptions, including increased volatility and diminished liquidity and credit availability. If economic and financial market conditions in the U.S. or other key markets, including Europe and Japan, continue to be uncertain or deteriorate, our customers may respond by further suspending, delaying or reducing their discretionary spending. Any further suspension, delay or reduction in discretionary spending could adversely affect revenue. Accordingly, our ability to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments decline. Such weak economic conditions may also inhibit our expansion into new European and other markets. We currently are unable to predict the extent of any of these potential adverse effects.
The Company has continued to see inflationary pressures during the period including higher wages and merchandise costs consistent with inflation and tariff impacts experienced by the global economy. As a result of existing and any new or additional tariffs, the cost of merchandise has and is expected to continue to increase; as a result we have in certain circumstances implemented price adjustments and undertaken an inventory review process and we may seek alternative sources of supply for merchandise. Further, the full impact of recent governmental actions on macroeconomic conditions and on our business is uncertain, difficult to predict and depends on a number of factors, including the extent and duration of tariffs, any reversal or temporary suspension of announced tariffs, the availability of exemptions, changes in the amount and scope of tariffs, the imposition of new tariffs and other measures that target countries may take in response to U.S. trade policies, the result of legal and other challenges on the tariffs, and possible resulting general inflationary pressures in the global economy, as well as the availability and cost of alternative sources of supply for merchandise. If these pressures persist, inflated costs may result in certain increased costs outpacing our pricing power in the near term.
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Fire at Rocky Mount Fulfillment Center
In December 2021, QVC experienced a fire at its Rocky Mount fulfillment center in North Carolina. Rocky Mount was the Company's second-largest fulfillment center, processing approximately 25% to 30% of volume for QVC-U.S., and also served as QVC-U.S.'s primary returns center for hard goods. The building was significantly damaged as a result of the fire and related smoke and did not reopen. The Company took steps to mitigate disruption to operations including diverting inbound orders, leveraging its existing fulfillment centers and supplementing these facilities with short-term leased space as needed. QVC sold the property in February 2023, and received net cash proceeds of $19 million. We assessed our network footprint and are making investments to increase throughput as a result of the loss of the Rocky Mount fulfillment center.
Based on the provisions of QVC's insurance policies certain fire related costs were recoverable. In June 2023, the Company agreed to a final insurance settlement with its insurance company and received all remaining proceeds related to the Rocky Mount claim. During the year ended December 31, 2023, the Company received $280 million of insurance proceeds, of which $210 million represented recoveries for business interruption losses. During the year ended December 31, 2023, the Company recorded $32 million of fire related costs and recognized net gains of $208 million representing proceeds received in excess of recoverable losses in restructuring, penalties and fire related costs, net of (recoveries) in the consolidated statements of operations.
Sale-leaseback Transactions
In November 2022, QVC entered into agreements to sell two properties located in Germany and the U.K. to an independent third party. Under the terms of the agreements, QVC received net cash proceeds of $182 million related to its German and U.K. facilities when the sales closed in January 2023. Concurrent with the sale, QVC entered into agreements to lease each of the properties back from the purchaser over an initial term of 20 years with the option to extend the terms of the property leases for up to four consecutive terms of five years. QVC recognized a $113 million gain related to the successful sale leaseback of the German and U.K. properties during the first quarter of 2023 calculated as the difference between the aggregate consideration received and the carrying value of the properties.
Impairment Risk
As a result of recent financial performance, macroeconomic conditions and credit rating downgrades, it was determined, during the second quarter of 2025, that an indication of impairment existed for the QxH reporting unit related to the QVC and HSN tradenames and goodwill. The Company recorded an impairment related to the QxH reporting unit, in which the goodwill was determined to be fully impaired. Additionally, an impairment was recorded related to the QVC and HSN tradenames and the carrying value was written down to fair value. As a result, the fair values of intangible assets within the QxH reporting unit do not significantly exceed their carrying values (refer to note 6 of the accompanying consolidated financial statements). The Company will continue to monitor current business performance versus the current and updated long-term forecasts, among other relevant considerations, to determine if the carrying value of its assets (including intangible assets) at each reporting unit is appropriate. Future outlook declines in revenue, cash flows, macroeconomic factors, business conditions, or other factors could result in a sustained decrease in fair value that may result in a determination that carrying value adjustments are required, which could be material.
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Results of Operations
QVC's operating results were as follows:
|
Years ended December 31,
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| (in millions) | 2025 | 2024 | ||||||
| Net revenue - U.S. GAAP | $ | 8,293 | 8,997 | |||||
| Operating costs and expenses: | ||||||||
| Cost of goods sold (exclusive of depreciation and amortization shown separately below) | 5,505 | 5,905 | ||||||
| Operating expenses | 637 | 693 | ||||||
| Advertising expenses | 369 | 312 | ||||||
| Selling, general and administrative excluding stock-based compensation and advertising | 972 | 989 | ||||||
| Adjusted OIBDA (defined below) - non-U.S. GAAP | 810 | 1,098 | ||||||
| Depreciation and amortization | 369 | 351 | ||||||
| Impairment of intangible assets | 930 | 578 | ||||||
| Impairment of goodwill | 1,465 | 902 | ||||||
| Gains on sales of assets and sale leaseback transactions | (5) | (1) | ||||||
|
Restructuring, penalties and fire related costs, net of (recoveries)
|
53 | 18 | ||||||
| Stock-based compensation | 15 | 20 | ||||||
| Operating (loss) income - U.S. GAAP | (2,017) | (770) | ||||||
| Other (expense) income: | ||||||||
| Interest expense | (286) | (267) | ||||||
| Interest income | 35 | 16 | ||||||
| Other (expense) income | (12) | 2 | ||||||
| (263) | (249) | |||||||
| Earnings (loss) before income taxes | (2,280) | (1,019) | ||||||
| Income tax (expense) benefit | 153 | (3) | ||||||
| Net earnings (loss) | (2,127) | (1,022) | ||||||
| Less: net (earnings) loss attributable to the noncontrolling interest | (41) | (47) | ||||||
| Net earnings (loss) attributable to QVC, Inc. stockholder | $ | (2,168) | (1,069) | |||||
Net revenue
Net revenue for each of QVC's segments was as follows:
| Years ended December 31, | ||||||||
| (in millions) | 2025 | 2024 | ||||||
| QxH | $ | 5,936 | 6,598 | |||||
| QVC-International | 2,357 | 2,399 | ||||||
| Consolidated QVC | $ | 8,293 | 8,997 | |||||
QVC's consolidated net revenue decreased $704 million, or 7.8% for the year ended December 31, 2025. The $704 million decrease in 2025 net revenue was primarily due to an 8% decrease in units shipped primarily attributable to QxH. The decrease was also driven by a 1.2% decrease in average selling price per unit ("ASP") primarily driven by QVC-International and to a lesser extent QxH and a $57 million decrease in shipping and handling revenue attributable to QxH. These decreases to net revenue were partially offset by a $198 million decrease in estimated product returns attributable to QxH and $66 million in favorable foreign exchange rates.
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During the year ended December 31, 2025 the changes in revenue and expenses were affected by changes in the exchange rates for the Euro, the U.K. Pound Sterling and the Japanese Yen. In the event the U.S. Dollar strengthens against these foreign currencies in the future, QVC's revenue and operating cash flow is likely to be negatively affected.
In discussing our operating results, the term "currency exchange rates" refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. Dollar. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the prior period's currency exchange rates. We refer to the results of this calculation as the impact of currency exchange rate fluctuations. Constant currency operating results refers to operating results without the impact of the currency exchange rate fluctuations. The disclosure of constant currency amounts or results permits investors to better understand QVC's underlying performance without the effects of currency exchange rate fluctuations.
The percentage change in net revenue for each of QVC's segments in U.S. Dollars and in constant currency was as follows:
| Year ended December 31, 2025 | Year ended December 31, 2024 | |||||||||||||||||||
| U.S. Dollars | Foreign Currency Exchange Impact | Constant Currency | U.S. Dollars | Foreign Currency Exchange Impact | Constant Currency | |||||||||||||||
| QxH | (10.0) | % | - | % | (10.0) | % | (5.7) | % | - | % | (5.7) | % | ||||||||
| QVC-International | (1.7) | % | 2.8 | % | (4.5) | % | (2.2) | % | (2.0) | % | (0.2) | % | ||||||||
In 2025, QxH's net revenue decline of $662 million, or 10%, was attributable to a 10.6% decrease in units shipped and a $53 million decrease in shipping and handling revenue. These declines were partially offset by a $156 million decrease in estimated product returns. For the year ended December 31, 2025, QxH experienced shipped sales declines across all product categories. QVC-International's net revenue declined $108 million, or 4.5% in constant currency, primarily due to a 2.7% decrease in units shipped across all markets except the U.K. and a 2.5% decrease in ASP across all markets except Italy. These declines were primarily offset by a $42 million decrease in estimated product returns. For the year ended December 31, 2025, QVC-International experienced shipped sales declines in constant currency across all product categories.
Cost of goods sold (exclusive of depreciation and amortization)
QVC's cost of goods sold as a percentage of net revenue was 66.4% and 65.6% for years ended December 31, 2025 and 2024, respectively. The increase in cost of goods sold as a percentage of revenue in 2025 was primarily due to higher fulfillment costs across both segments driven by increased freight rates and warehousing costs and higher product costs driven by tariffs at QxH. These increases were partially offset by improved margins on returns at QxH.
Operating expenses
QVC's operating expenses are principally comprised of commissions, order processing and customer service expenses, credit card processing fees and telecommunications expenses. Operating expenses were 7.7% of net revenue for each of the years ended December 31, 2025 and 2024.
Advertising
QVC recorded $369 million and $312 million of advertising expenses for the years ended December 31, 2025 and 2024, respectively. QVC's advertising expenses increased $57 million, or 18.3% for the year ended December 31, 2025 in comparison to the corresponding prior year attributable to a $53 million increase in advertising investments at QxH driven by increased focus on social and streaming platforms in the current year.
Selling, general and administrative expenses excluding stock-based compensation and advertising
QVC's selling, general, and administrative expenses ("SG&A") excluding stock-based compensation and advertising include personnel, information technology ("IT"), production costs and the provision for doubtful accounts. Such expenses decreased $17 million for the year ended December 31, 2025 as compared to the prior year and increased as a percentage of revenue from 11.0% to 11.7% of net revenue .
The decrease in expense in 2025 resulted from a $54 million decrease in personnel costs attributable to QxH resulting from lower wages due to the reorganization of teams across the Company as part of the WIN strategy announced at the end of the first quarter of 2025 as well as a workforce reduction associated with the shift in the IT operating model that occurred in the second quarter of the prior year. The decrease was partially offset by a $25 million increase in management bonus expense
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primarily attributable to the cancellation of all QVCGA stock-settled and cash-settled RSU awards granted during 2025 that were replaced with a cash award (see note 10 of the accompanying consolidated financial statements) and a $16 million increase in professional services expense.
Depreciation and amortization
Depreciation and amortization consisted of the following:
| Years ended December 31, | ||||||||
| (in millions) | 2025 | 2024 | ||||||
| Property and equipment depreciation | $ | 118 | 77 | |||||
| Customer relationships amortization | 47 | 47 | ||||||
| Television distribution right amortization | 73 | 80 | ||||||
| Software amortization | 131 | 147 | ||||||
| Total amortization | 251 | 274 | ||||||
| Total depreciation and amortization | $ | 369 | 351 | |||||
For the year ended December 31, 2025, property and equipment depreciation increased primarily due to $45 million of accelerated depreciation of the St. Petersburg, FL campus and associated assets as a result of the closure completed in the third quarter of 2025. The decrease in amortization expense was driven by lower software amortization as a result of assets that fully amortized during 2024. The decrease in television distribution right amortization and related expenses for the year ended December 31, 2025 was due to lower subscriber counts.
Impairment of intangible assets
QVC recorded intangible asset impairment losses of $930 million and $578 million for the years ended December 31, 2025 and 2024, respectively, related to the decrease in the fair value of the QVC and HSN tradenames as a result of quantitative assessments performed by the Company (refer to note 6 to the accompanying consolidated financial statements).
Impairment of goodwill
QVC recorded goodwill impairment losses of $1,465 million and $902 million for the years ended December 31, 2025 and 2024, respectively, related to a decrease in the fair value of the QxH reporting unit as a result of quantitative assessments performed by the Company (refer to note 6 to the accompanying consolidated financial statements).
Gains on sales of assets and sale-leaseback transactions
QVC recorded $5 million gains on sales of assets and sale-leaseback transactions for the year ended December 31, 2025 primarily related to the closing of two of the St. Petersburg property sales. QVC recorded $1 million of gain on sale of assets and sale leaseback transactions for the year ended December 31, 2024 related to the sale-leaseback of a property in Germany.
Restructuring, penalties and fire related costs, net of (recoveries)
QVC recorded restructuring charges of $53 million and $18 million for the years ended December 31, 2025 and 2024, respectively, in restructuring, penalties and fire related costs, net of recoveries. For the year ended December 31, 2025, QVC recorded restructuring charges of $34 million and $19 million at QxH and QVC International, respectively, to reorganize teams across the Company as part of the WIN strategy (refer to note 12 to the accompanying consolidated financial statements). For the year ended December 31, 2024, QVC recorded restructuring charges of $18 million related to the shift in QVC's IT operating model with a resulting workforce reduction.
Stock-based compensation
Stock-based compensation includes compensation related to options and restricted stock granted to certain officers and employees. QVC recorded $15 million and $20 million of stock-based compensation expense for the years ended December 31, 2025 and 2024, respectively. The decrease in 2025 was primarily related to the cancellation of all QVCGA stock-settled and cash-settled RSU awards granted during 2025 (refer to note 10 to the accompany consolidated financial statements).
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Interest expense
QVC recorded $286 million and $267 million of interest expense for the years ended December 31, 2025 and 2024, respectively. The increase in interest expense during the year ended December 31, 2025 was primarily due to higher outstanding debt during 2025.
Interest income
QVC recorded $35 million and $16 million of interest income for the years ended December 31, 2025 and 2024, respectively. The increase in interest income during the year ended December 31, 2025 was primarily due to higher invested cash balances during the current year.
Other (expense) income
QVC recorded $12 million of other expense and $2 million of other income for the for the years ended December 31, 2025 and 2024, respectively. Other (expense) income is primarily related to foreign exchange gains and losses. Certain loans between QVC and its subsidiaries are deemed to be short-term in nature, and accordingly, the translation of these loans is recorded in the consolidated statements of operations. The change in foreign currency gain (loss) was due to variances in short-term loans, interest and operating payables balances between QVC and its international subsidiaries denominated in the currency of the subsidiary and the effects of currency exchange rate changes on those balances.
Income taxes
| Years ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Earnings (loss) before income taxes | $ | (2,280) | (1,019) | |||||
| Income tax (expense) benefit | 153 | (3) | ||||||
| Effective income tax rate | 6.7 | % | (0.3) | % | ||||
For the year ended December 31, 2025, income tax benefit differs from the U.S. federal income tax rate of 21% primarily due to goodwill impairment losses of $1,465 million and tradename impairment losses of $930 million that are not deductible for tax purposes (see note 6 of the accompanying consolidated financial statements).
For the year ended December 31, 2024, income tax expense differs from the U.S. federal income tax rate of 21% primarily due to goodwill impairment losses of $902 million and tradename impairment losses of $578 million that are not deductible for tax purposes (see note 6 of the accompanying consolidated financial statements).
Adjusted Operating Income before Depreciation and Amortization (Adjusted OIBDA)
To provide investors with additional information regarding our financial statements, we disclose Adjusted OIBDA (defined below), which is a non-U.S. generally accepted accounting principles ("U.S. GAAP") measure. QVC defines Adjusted OIBDA as operating (loss) income plus depreciation and amortization, impairment of goodwill and intangible assets, stock-based compensation and excluding restructuring, penalties and fire related costs, net of recoveries and gains on sale of assets and sale-leaseback transactions. QVC's chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate the businesses and make decisions about allocating resources among the businesses. QVC believes that this is an important indicator of the operational strength and performance of the segments by identifying those items that are not directly a reflection of each segment's performance or indicative of ongoing business trends. In addition, this measure allows QVC to view operating results, perform analytical comparisons and perform benchmarking among its businesses and identify strategies to improve performance. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. GAAP.
II-9
The primary material limitations associated with the use of Adjusted OIBDA as compared to U.S. GAAP results are (i) it may not be comparable to similarly titled measures used by other companies in the industry, and (ii) it excludes financial information that some may consider important in evaluating QVC's performance. QVC compensates for these limitations by providing disclosure of the difference between Adjusted OIBDA and U.S. GAAP results, including providing a reconciliation of Adjusted OIBDA to U.S. GAAP results, to enable investors to perform their own analysis of QVC's operating results. The following table provides a reconciliation of operating income to Adjusted OIBDA.
| Years ended December 31, | ||||||||
| (in millions) | 2025 | 2024 | ||||||
| Operating (loss) income - U.S. GAAP | $ | (2,017) | (770) | |||||
| Depreciation and amortization | 369 | 351 | ||||||
| Impairment of intangible assets | 930 | 578 | ||||||
| Impairment of goodwill | 1,465 | 902 | ||||||
| Gains on sales of assets and sale leaseback transactions | (5) | (1) | ||||||
|
Restructuring, penalties and fire related costs, net of (recoveries)
|
53 | 18 | ||||||
| Stock-based compensation | 15 | 20 | ||||||
| Adjusted OIBDA - Non-U.S. GAAP | $ | 810 | 1,098 | |||||
QVC Adjusted OIBDA decreased by $288 million for the year ended December 31, 2025. The decrease for the year ended December 31, 2025 is due to a $248 million decrease at QxH and an $40 million decrease at QVC-International.
Seasonality
QVC's business is seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping. In recent years, QVC has earned, on average, between 23% and 24% of its revenue in each of the first three quarters of the year and between 29% and 30% of its revenue in the fourth quarter of the year.
Financial Position, Liquidity and Capital Resources
General
The following are potential sources of liquidity: available cash balances, equity issuances, dividend and interest receipts, proceeds from asset sales, and cash generated by the operating activities of our wholly-owned subsidiaries. Cash generated by the operating activities of our subsidiaries is only a source of liquidity to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted. In general, QVC uses this cash to fund its operations, make capital purchases, make dividend payments to QVC Group, make interest payments and minimize QVC's outstanding senior secured credit facility balance. The Company expects that cash on hand and cash provided by operating activities in future periods will be sufficient to fund projected uses of cash, except for any principal amount of the Credit Facility and senior secured notes that may become due and payable as a result of noncompliance with the net leverage ratio and the Chapter 11 cases, as described above.
As of December 31, 2025, substantially all of QVC's cash and cash equivalents were invested in AAA rated money market funds and time deposits with banks rated equal to or above A.
Senior Secured Notes
On February 18, 2025, QVC repaid the remaining 4.45% Senior Secured Notes due 2025, at maturity, using availability on the Credit Facility and cash on hand.
During prior years, QVC issued $400 million principal amount 5.45% senior secured notes due 2034 at an issue price of 99.784%, $300 million principal amount of 5.95% senior secured notes due 2043 at an issue price of 99.973%, $225 million of the 2067 Notes at par, and $500 million of the 2068 Notes at par.
II-10
On September 11, 2024, QVC commenced a private offer to existing bondholders to exchange any and all of QVC's outstanding 2027 Notes for $350 principal amount of QVC's newly-issued 2029 Notes and $650 in cash per $1,000 principal amount of 2027 Notes exchanged, and any and all of QVC's outstanding 2028 Notes for $1,000 principal amount of the 2029 Notes per $1,000 principal amount of 2028 Notes exchanged (the "Exchange"), and a private offer to purchase 2027 Notes and 2028 Notes for cash from holders who were not eligible to participate in the private exchange offer. On September 25, 2024, QVC issued an aggregate principal amount of $605 million in 2029 Notes and paid $352 million in cash consideration (including $277 million contributed by QVC Group) in exchange for $531 million of the 2027 Notes and $428 million of the 2028 Notes. The Exchange was accounted for as a debt modification in accordance with U.S. GAAP and fees paid to third parties were included in other expense in the consolidated statement of operations for the year ended December 31, 2024.
QVC's senior secured notes contain certain covenants, including certain restrictions on it and its restricted subsidiaries (subject to certain exceptions), with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; and restricting subsidiary distributions.
Under both the Fifth Amended and Restated Credit Agreement and the indentures governing the senior secured notes, QVC is permitted to make unlimited dividends to service the debt of its parent entities so long as it is not in default under those agreements and to make certain restricted payments to QVC Group under an intercompany tax sharing agreement in respect of certain tax obligations of QVC and its subsidiaries. As a result of the breach of financial covenant under the Fifth Amended and Restated Credit Agreement, QVC is no longer permitted to make unlimited dividends to service the debt of its parent entities to QVC Group. QVC can continue to make certain restricted payments to QVC Group under an intercompany tax sharing agreement in respect of certain tax obligations of QVC and its subsidiaries.
II-11
Senior Secured Credit Facility
On October 27, 2021, QVC entered into the Fifth Amended and Restated Credit Agreement (the "Credit Agreement") with CBI and QVC Global Corporate Holdings, LLC ("QVC Global"), each a direct or indirect wholly owned subsidiary of QVC Group, as borrowers (collectively, the "Borrowers"). The Credit Facility is a multi-currency facility providing for a $3.25 billion revolving credit facility, with a $450 million sub-limit for letters of credit and an alternative currency revolving sub-limit equal to 50% of the revolving commitments thereunder. The Credit Facility may be borrowed by any Borrower, with each Borrower jointly and severally liable for the outstanding borrowings. Borrowings bear interest at either the alternate base rate ("ABR Rate") or a London Inter-bank Offered Rate ("LIBOR")-based rate (or the applicable non-U.S. Dollar equivalent rate) ("Term Benchmark/RFR Rate") at the applicable Borrower's election in each case plus a margin. Borrowings that are ABR Rate loans will bear interest at a per annum rate equal to the base rate plus a margin that varies between 0.25% and 0.625% depending on the Borrowers' combined ratio of consolidated total debt to consolidated EBITDA (the "consolidated net leverage ratio"). Borrowings that are Term Benchmark/RFR Rate loans will bear interest at a per annum rate equal to the applicable rate plus a margin that varies between 1.25% and 1.625% depending on the Borrowers' consolidated net leverage ratio. Each loan may be prepaid at any time and from time to time without penalty, other than customary breakage costs. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed availability; provided that, if QVC Global or any other borrower (other than QVC) is removed, at the election of QVC, as a borrower thereunder, all of its loans must be repaid and its letters of credit are terminated or cash collateralized. Any amounts prepaid may be reborrowed.
On June 20, 2023, QVC, QVC Global and CBI, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties thereto entered into an agreement whereby, in accordance with the Credit Agreement, LIBOR-based rate loans denominated in U.S. dollars made on or after June 30, 2023 would be replaced with Secured Overnight Financing Rate ("SOFR")-based rate loans. Borrowings that are SOFR-based loans will bear interest at a per annum rate equal to the applicable SOFR rate, plus a credit spread adjustment, plus a margin that varies between 1.25% and 1.625% depending on the Borrowers' consolidated net leverage ratio.
On April 1, 2025, CBI was removed as a borrower under the Credit Agreement. CBI had no outstanding borrowings under the Credit Facility at the time of its removal from the Credit Agreement.
The loans under the Credit Facility are scheduled to mature on October 27, 2026. Payment of the loans may be accelerated following certain customary events of default. Refer to note 1, for additional discussion regarding the Company's Chapter 11 Cases, noncompliance with the net leverage ratio, as of December 31, 2025 and a discussion regarding the Company's substantial doubt about its ability to continue as a going concern.
As a result of noncompliance with the net leverage ratio, no additional borrowings are available under the Fifth Amended and Restated Credit Agreement. The interest rate on the Credit Facility was 5.45% and 6.06% at December 31, 2025 and 2024, respectively.
The payment and performance of the Borrowers' obligations under the Credit Agreement are guaranteed by each of QVC's and QVC Global's Material Domestic Subsidiaries (as defined in the Credit Agreement), if any, and certain other subsidiaries of any Borrower that such Borrower has chosen to provide guarantees. Further, the borrowings under the Fifth Amended and Restated Credit Agreement are secured, pari passu with QVC's existing notes, by a pledge of all of QVC's equity interests.
The Credit Agreement contains certain affirmative and negative covenants, including certain restrictions on the Borrowers and each of their respective restricted subsidiaries (subject to certain exceptions) with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; dissolving, consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; restricting subsidiary distributions; and limiting the Borrowers' consolidated net leverage ratio.
II-12
Parent Issuer and Subsidiary Guarantor Summarized Financial Information
The following information contains the summarized financial information for the combined parent (QVC, Inc.) and subsidiary guarantors (Affiliate Relations Holdings, Inc.; Affiliate Investment, Inc.; AMI 2, Inc.; ER Marks, Inc.; QVC Global Corporate Holdings, LLC; QVC GCH Company, LLC; QVC Rocky Mount, Inc.; QVC San Antonio, LLC; QVC Global Holdings I, Inc.; HSN, Inc; HSNi, LLC; HSN Holding LLC; Home Shopping Network En Espanol, L.P.; Home Shopping Network En Espanol, L.L.C.; Ingenious Designs LLC; NLG Merger Corp.; Ventana Television, Inc.; and Ventana Television Holdings, Inc.) pursuant to Rules 3-10, 13-01 and 13-02 of Regulation S-X.
This consolidated summarized financial information has been prepared from the Company's financial information on the same basis of accounting as the Company's consolidated financial statements. Transactions between the parent and subsidiary guarantors presented on a combined basis have been eliminated. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, such as management fees, royalty revenue and expense, interest income and expense and gains on intercompany asset transfers. Goodwill and other intangible assets have been allocated to the subsidiaries based on management's estimates. Certain costs have been partially allocated to all of the subsidiaries of the Company.
The subsidiary guarantors are 100% owned by the Company. All guarantees are full and unconditional and are joint and several. There are no significant restrictions on the ability of the Company to obtain funds from its U.S. subsidiaries, including the guarantors, by dividend or loan.
Summarized financial information for the most recent annual period was as follows:
| Combined Parent-QVC, Inc. and Subsidiary Guarantors | |||||
| December 31, 2025 | |||||
| Current assets | $ | 2,693 | |||
| Intercompany payable to non-guarantor subsidiaries | (2,274) | ||||
| Note receivable - related party | 1,740 | ||||
| Noncurrent assets | 1,784 | ||||
| Current liabilities | 5,906 | ||||
| Noncurrent liabilities | 405 | ||||
| Combined Parent-QVC, Inc. and Subsidiary Guarantors | |||||
|
Year ended December 31, 2025 |
|||||
| Net revenue | $ | 6,481 | |||
| Net revenue less cost of goods sold | 2,684 | ||||
| Loss before taxes | (2,389) | ||||
| Net loss | (2,127) | ||||
| Net loss attributable to QVC, Inc. Stockholder | (2,168) | ||||
Other Debt Related Information
As described above in note 1, as of December 31, 2025 QVC is not in compliance with the net leverage ratio, as calculated under the Credit Facility. Under the terms of the Fifth Amended and Restated Credit Agreement, this constitutes a breach of the financial covenant.
The weighted average interest rate applicable to all outstanding debt (excluding finance leases) prior to amortization of bond discounts and related debt issuance costs was 5.8% and 5.9% as of December 31, 2025 and 2024, respectively.
II-13
Under both the Fifth Amended and Restated Credit Agreement and the indentures governing the senior secured notes, QVC is permitted to make unlimited dividends to service the debt of its parent entities so long as it is not in default under those agreements and to make certain restricted payments to QVC Group under an intercompany tax sharing agreement in respect of certain tax obligations of QVC and its subsidiaries. As a result of the breach of financial covenant under the Fifth Amended and Restated Credit Agreement, QVC is no longer permitted to make unlimited dividends to service the debt of its parent entities to QVC Group. QVC can continue to make certain restricted payments to QVC Group under an intercompany tax sharing agreement in respect of certain tax obligations of QVC and its subsidiaries.
As a result, QVC Group will, in many instances, be permitted to rely on QVC's cash flow for servicing QVC Group's debt. These events may increase accumulated deficit or require QVC to borrow under the Credit Facility, to the extent available, increasing QVC's leverage and decreasing liquidity. QVC has made significant distributions to QVC Group in the past.
During the year ended December 31, 2025, QVC Group and certain of its subsidiaries experienced multiple credit rating downgrades by Fitch Ratings, Moody's Ratings and S&P Global Ratings, including reductions in QVC's long-term issuer and senior secured ratings. A downgrade of QVC's credit ratings and rating outlooks has adversely affected, and will likely continue to adversely affect, the market prices of its debt securities and its access to capital, and may trigger additional collateral or funding requirements or the imposition of financial or other burdensome covenants. See Part I, Item 1A. "Risk Factors" in this Annual Report on Form 10-K for additional information.
Additional Cash Flow Information
During the year ended December 31, 2025, QVC's primary uses of cash were $586 million of principal repayment of senior secured notes, $282 million of principal payments of our senior secured credit facility and finance lease obligations, $225 million of capital and television distribution rights expenditures, $44 million in dividend payments from the Company's Japanese operations ("QVC-Japan") to Mitsui & Co. LTD ("Mitsui") and $42 million of dividends to QVC Group. These uses of cash were funded primarily with $1,986 million of principal borrowings from our senior secured credit facility and $419 million of cash provided by operating activities. As of December 31, 2025, QVC's cash, cash equivalents and restricted cash balance was $1,557 million.
As of December 31, 2025, $329 million of the $1,557 million in cash, cash equivalents and restricted cash was held by foreign subsidiaries. Cash in foreign subsidiaries is available for domestic purposes with no significant tax consequences upon repatriation to the U.S. QVC accrues taxes on the unremitted earnings of its international subsidiaries. Approximately 35% of this foreign cash balance was that of QVC-Japan. QVC owns 60% of QVC-Japan and shares all profits and losses with the 40% minority interest holder, Mitsui. We believe that we currently have appropriate legal structures in place to repatriate foreign cash as tax efficiently as possible and meet the business needs of QVC.
The change in cash provided by operating activities for the year ended December 31, 2025 compared to the previous year was primarily due to changes in working capital items. Working capital at any specific point in time is subject to many variables, including seasonality, inventory management, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.
II-14
Other
QVC's material cash requirements for the next year, outside of normal operating expenses, include the costs to service outstanding debt, expenditures for affiliation agreements with television providers, and capital expenditures. Capital expenditures are expected to be between $170 and $190 million. The Company also may make dividend payments to QVC Group. Refer to the off-balance sheet arrangements and aggregate contractual obligations table below for a summary of other material cash requirements. The Company expects that cash on hand and cash provided by operating activities in future periods will be sufficient to fund projected uses of cash, except for any principal amount of the Credit Facility and senior secured notes that may become due and payable as a result of noncompliance with the net leverage ratio and the Chapter 11 Cases, as described above.
Subject to Bankruptcy Court approval and the terms of the Plan, the Company may from time to time repurchase any level of its outstanding debt through open market purchases, privately negotiated transactions, redemptions, tender offers or otherwise. Repurchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
QVC has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible QVC may incur losses upon the conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, that may be required to satisfy such contingencies will not be material in relation to the accompanying consolidated financial statements.
Off-balance Sheet Arrangements and Aggregate Contractual Obligations
Information concerning the amount and timing of cash requirements, both accrued and off-balance sheet, under our contractual obligations at December 31, 2025 is summarized below:
| Payments due by period | |||||||||||||||||||||||
| (in millions) | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | ||||||||||||||||
| Debt (1)(2) | $ | 2,900 | 44 | 72 | 605 | - | 1,425 | 5,046 | |||||||||||||||
| Interest payments (3) | 265 | 131 | 130 | 106 | 85 | 2,025 | 2,742 | ||||||||||||||||
| Operating lease obligations | 89 | 88 | 87 | 88 | 89 | 631 | 1,072 | ||||||||||||||||
| Purchase obligations and other (4) | 2,037 | 124 | 124 | 101 | - | - | 2,386 | ||||||||||||||||
(1) As discussed above, the senior secured notes have been classified as a current liability in the consolidated Balance Sheet, as of December 31, 2025. The table above reflects the contractual maturities of the senior secured notes.
(2) Amounts exclude the issue discounts on the 5.45% Senior Secured Notes due 2034 and 5.95% Senior Secured Notes due 2043.
(3) Amounts (i) are based on the terms of our senior secured notes and (ii) assumes that our existing debt is repaid at maturity
(4) Amounts include open purchase orders for inventory and non-inventory purchases along with other contractual obligations, regardless of our ability to cancel such obligations
Critical Accounting Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires QVC to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates under different assumptions or conditions. Estimates include, but are not limited to, sales returns, uncollectible receivables, inventory net realizable value, depreciable lives of fixed assets and internally developed software, and valuation of acquired intangible assets and goodwill. QVC bases its estimates on historical experience and on various other assumptions that QVC believes to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates under different assumptions or conditions. In addition, as circumstances change, QVC may revise the basis of its estimates accordingly.
II-15
Goodwill and long-lived assets
QVC's long-lived asset valuations are primarily comprised of the annual assessment of the recoverability of goodwill and other nonamortizable intangibles, such as tradenames, and the evaluation of the recoverability of other long-lived assets upon certain triggering events. If the carrying value of long-lived assets exceeds their undiscounted cash flows, QVC is required to write the carrying value down to the fair value. Any such writedown is included as an impairment loss in the consolidated statements of operations. A high degree of judgment is required to estimate the fair value of the long-lived assets. QVC may use quoted market prices, prices for similar assets, present value techniques and other valuation techniques to prepare these estimates. QVC may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques. Due to the high degree of judgment involved in estimation techniques, any value ultimately derived from the long-lived assets may differ from the estimate of fair value. As all of QVC's operating segments have long-lived assets, this critical accounting estimate affects the financial position and results of operations of each segment.
For the year ended December 31, 2025, the intangible assets not subject to amortization for each of our reportable segments were as follows:
| (in millions) | Goodwill | Tradenames | Total | ||||||||
| QxH | $ | - | 1,190 | 1,190 | |||||||
| QVC-International | 800 | - | 800 | ||||||||
| Balance as of December 31, 2025 | $ | 800 | $ | 1,190 | $ | 1,990 | |||||
We perform our annual assessment of the recoverability of our goodwill and other non-amortizable intangible assets during the fourth quarter of each year, or more frequently, if events or circumstances indicate impairment may have occurred. We perform goodwill impairment testing at the reporting unit level, which is defined in accounting guidance in accordance with U.S. GAAP as an operating segment or one level below an operating segment (also known as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. The Company considers its reporting units to align with its operating segments.
QVC may utilize a qualitative assessment for determining whether a quantitative goodwill and other non-amortizable intangible asset impairment analysis is necessary. The accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether an impairment exists. In evaluating goodwill on a qualitative basis, QVC reviews the business performance of each reporting unit and evaluates other relevant factors as identified in the relevant accounting guidance to determine whether it is more likely than not that an indicated impairment exists for any of our reporting units. The Company considers whether there were any negative macroeconomic conditions, industry specific conditions, market changes, increased competition, increased costs in doing business, management challenges and the legal environments, and how these factors might impact country specific performance in future periods.
As part of the analysis the Company also considers fair value determinations for certain reporting units that have been made at various points throughout the current and prior years for other purposes. For each of the years ended December 31, 2025, 2024 and 2023, respectively, impairments of $1,465 million, $902 million and $326 million related to the QxH reporting unit goodwill were recorded in impairment of goodwill in the consolidated statements of operations.
The Company recorded impairments of $930 million and $578 million for each of the years ended December 31, 2025 and 2024 related to the tradenames associated with QVC and HSN in the QxH reporting unit.
The quantitative goodwill impairment test compares the estimated fair value of a reporting unit to its carrying value. The Company determines fair values for each of the reporting units using a discounted cash flow model (a form of the income approach). Developing estimates of fair value requires significant judgments, including making assumptions about appropriate discount rates, perpetual growth rates, relevant comparable market multiples, public trading prices and the amount and timing of expected future cash flows. The cash flows employed in QVC Group's valuation analyses are based on management's best estimates considering current marketplace factors and risks as well as assumptions of growth rates in future years. There is no assurance that actual results in the future will approximate these forecasts.
II-16
Following our annual impairment assessment performed during the fourth quarter of 2025, it was determined that the fair values of non-amortizable intangible assets at the QxH reporting unit do not significantly exceed their carrying values. The Company will continue to monitor current business performance versus the current and updated long-term forecasts, among other relevant considerations, to determine if the carrying value of its assets (including intangible assets) at each reporting unit is appropriate. Future outlook declines in revenue, cash flows, macroeconomic factors, business conditions, or other factors could result in a sustained decrease in fair value that may result in a determination that carrying value adjustments are required, which could be material.
Retail related adjustments and allowances
QVC records adjustments and allowances for sales returns, inventory net realizable value and uncollectible receivables. Each of these adjustments is estimated based on historical experience. Sales returns are calculated as a percent of sales and are netted against revenue in the consolidated statement of operations. Sales returns represented 15.3%, 15.9% and 16.3% of gross product revenue for the years ended December 31, 2025, 2024 and 2023, respectively. Assessments about the realizability of inventory require the Company to make judgments based on the aging of its inventory balance, the likely method of disposition, and the estimated recoverable values based on historical experience of inventory markdowns and liquidation. Any change in estimate of net realizable value is included in cost of goods sold in the consolidated statements of operations. Inventories were $832 million and $901 million as of December 31, 2025 and 2024, respectively. The allowance for credit losses is calculated as a percent of trade receivable at the end of a reporting period, and it is based on historical experience, with the change in such allowance being recorded as a provision for credit losses in SG&A in the consolidated statements of operations. Trade accounts receivable (including installment payment, credit card and customer receivables) was $983 million and $1,140 million, as of December 31, 2025 and 2024, respectively. Allowance for credit losses related to uncollectible trade accounts receivable was $64 million and $75 million as of December 31, 2025 and 2024, respectively. Each of these adjustments requires management judgment. Actual results could differ from management's estimates.
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