By James Rogers
Online marketplace reports better-than-expected second-quarter earnings, in-line sales
Etsy Inc. reported its second-quarter results after market close on Wednesday, posting better-than-expected earnings and gross merchandise sales in line with Wall Street's forecast.
Buoyed by the results, Etsy Inc.'s shares (ETSY) gained 9% in aftermarket trading, and maintained the bulk of that advance in premarket trades early Thursday, after ending regular trading up 2.4% at $95.50.
The online marketplace operator reported second-quarter net income of $73.1 million, or 51 cents a share, compared with net income of $98.3 million, or 68 cents a share, in the year-earlier quarter. Etsy said the net-income decline was primarily attributable to increased employee-compensation-related expenses, with total employee headcount increasing approximately 70% on a year-over-year basis following the acquisitions of Depop and of Elo7. Analysts polled by FactSet expected Etsy to report net income of $47 million and earnings of 32 cents a share.
Etsy said it had gross merchandise sales of $3.01 billion, in line with Wall Street's expectations, and down 0.4% from $3.04 billion in the same period last year. Sales were $585.1 million, up from $528.9 million in the prior year's second quarter. The FactSet consensus foresaw sales of $556 million.
The company's marketplace revenue was $439.5 million, compared with $395.5 million in the year-ago quarter, and above the FactSet consensus of $416 million. Services revenue was $145.6 million, up from $133.4 million in the prior-year quarter. Analysts surveyed by FactSet had forecast services revenue of $143 million.
However, the company cited the impact of macro headwinds that include pressures on consumer discretionary spending, reopening, foreign exchange-rate volatility and ongoing geopolitical uncertainty.
"Our second-quarter results once again reflect that Etsy has maintained most of our pandemic gains, and that we are able to deliver strong bottom-line performance while simultaneously investing in key initiatives," said Etsy CEO Josh Silverman, in a statement. "Despite facing headwinds caused by macroeconomic and geopolitical factors, we believe the improvements we've driven in customer experiences across the Etsy marketplace and our House of Brands, coupled with continued focus on our 'Right to Win' strategy, will enable us to unlock the enormous long-term opportunities we see ahead."
Etsy gave third-quarter gross merchandise sales guidance of $2.8 billion to $3 billion. Analysts tracked by FactSet had forecast $3.08 billion. For the third quarter, Etsy expects revenue of $540 million to $575 million. FactSet's consensus calls for third-quarter revenue of $568 million.
See:Wednesday's worst-performing stocks mostly come from this one sector that has investors really worried
Speaking during a webcast to discuss the results late Wednesday, Silverman said that Etsy continues to weather changes in the global economy. "Disposable income is under more pressure than it has been in a long time," he said.
The CEO acknowledged that "it's not an easy time for the world," adding that, even in downside scenarios, Etsy is well-positioned to deliver healthy profitability.
Concerns about slowing consumer spending have swirled around Etsy in recent weeks, prompting a number of analysts to cut their price targets for the company.
Last week, in an earnings preview, Truist Securities adjusted its Etsy estimates lower to reflect currency-related headwinds and the risk of a mild recession in 2023. "On the one hand, nearly all of Etsy's GMS [gross merchandise sales] is discretionary consumer [spending], which tends to get hit in a recession," wrote Truist analyst Naved Khan. "On the other hand, Etsy's relatively low average ticket size and differentiated products could make it more resilient in a recession than higher AOV [average order value], less differentiated categories, such as home wares or fitness equipment."
As the company eyes growth opportunities, Etsy is also setting its sights on male shoppers. About three-quarters of the company's shoppers in the U.S. and U.K. are women.
See:Etsy is setting its sights on male shoppers
Shares of Etsy have declined 56.4% this year, outpacing the S&P 500 Index's 15.6% retreat. The Dow Jones Industrial Average has fallen 11.4%.
(END) Dow Jones Newswires
July 28, 2022 08:00 ET (12:00 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.