What happened

Shares of media conglomerateLiberty Interactive (NASDAQ:QVCA) tumbled on Tuesday following a disappointing second-quarter report. Total revenue slumped due to weak sales from broadcast network QVC, and net income dropped as well. The stock was down about 10% at 11:30 a.m.

Liberty Interactive's QVC Group reported second-quarter revenue of $2.35 billion, down 3.2% year over year and $50 million below analyst expectations. Consolidated revenue from QVC was down 4% year over year, or down 3% adjusted for currency. QVC's U.S. revenue slumped 4%, with a system outage responsible for a 1% negative impact, while QVC's international segment posted revenue growth of 2%, adjusted for currency.

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QVC will soon be joined by HSN, with Liberty Interactive agreeing in July to buy the 62% of the company that it doesn't currently own. The transaction is expected to close during the fourth quarter of this year, creating a home shopping powerhouse.

Adjusted net income for the QVC Group was $188 million, down 14% year over year. QVC CEO Mike George discussed plans to return the company to growth: "We are executing on a number of strategies that we expect to restore healthy growth, with a particular focus on greater diversity and newness in our assortments. We were delighted with the strong performance of our International segment, which was led byQVC Japan."

In addition to acquiring HSN, Liberty Interactive agreed in April to merge with General Communication. Certain Liberty Ventures assets will be merged with General Communication, forming a new company, GCI Liberty. At the same time, Liberty Interactive will be renamed QVC Group and become an asset-backed stock, comprised of QVC, HSN, and zulily.

After the dust has settled, the new QVC Group will be faced with the challenge of returning to growth at a time when e-commerce's share of total retail sales is increasing. E-commerce will be part of the strategy, but weak sales at QVC during the second quarter gave investors a good reason to be skeptical.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends General Communication. The Motley Fool has a disclosure policy.

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Why Shares of Liberty Interactive Dropped Today - Motley Fool