Josh Silverman, CEO of Etsy
Adam Jefferies | CNBC
Etsy shares rose as much as 10% in extended trading on Wednesday after the online marketplace’s third-quarter revenue and profits beat expectations. The company also released an upbeat forecast for the current period.
Here’s how the company did it:
- Merits: 58 cents per share, adjusted, versus 36 cents per share expected by analysts, according to Refinitiv.
- Revenue: $594.5 million versus $565 million expected by analysts, according to Refinitiv.
For the fourth quarter, Etsy expects revenue of between $700 million and $780 million and gross merchandise sales of $3.6 billion to $4 billion. Wall Street forecast fourth-quarter revenue of $743 million and GMS of $3.9 billion, according to StreetAccount.
Etsy reported a net loss of $963.1 million in the third quarter, which included a $1.04 billion goodwill impairment to write off the value of its acquisitions of fashion resale app Depop and Brazilian marketplace Elo7, which it bought for $1.62 billion and $217 million, respectively. Excluding the impairment, Etsy’s adjusted earnings were 58 cents per share.
Third-quarter revenue rose 11.7% from the year-ago period, boosted by Etsy’s increase in transaction fees. The company announced last April that it would increase the transaction fees it charges sellers from 5% to 6.5%, prompting backlash from merchants, including a week-long strike.
Investors have been keeping a close eye on e-commerce companies’ forecasts for the fourth quarter as a barometer of inflationary consumers’ willingness to spend over the holiday period. The latest warning came from Amazon last week, when it forecast fourth-quarter sales growth of 2% to 8%, missing Wall Street expectations.
Analysts are expecting a lackluster holiday shopping season, with online sales in November and December expected to rise just 2.5% year over year, according to Adobe.
“We don’t know if consumers will spend more or less on gifts, or if they will shop more online or in malls,” Etsy CEO Josh Silverman said in the results release. “But the good news is that our business — with differentiated inventory in our House of Brands and a variable cost model — doesn’t depend on us making big bets on these questions like most other retailers or e-tailers have to do.” “
“That’s why we’re doing everything we can to make sure Etsy sellers have the best holiday season possible — especially with the ongoing economic uncertainty,” he added.
CLOCK: Inflation is weighing on holiday gift budgets