EBay Forecast Disappoints, Highlighting Threat of Amazon

(Bloomberg) -- EBay Inc. gave a disappointing forecast for revenue growth in the second quarter, taking the shine off Chief Executive Officer Devin Wenig’s turnaround strategy.

The online marketplace said sales will be $2.64 billion to $2.68 billion in the second quarter, while analysts were projecting $2.68 billion. The outlook stirred concerns about the company’s ability to return to consistent growth and sent the shares tumbling, blunting momentum it had from a strong holiday season.

Investors are carefully watching EBay’s sales to determine if it can remain relevant in an e-commerce market dominated by Amazon.com Inc. Adding to the pressure are brick-and-mortar retailers like Walmart Inc. that are enhancing their own digital-shopping options.

"We’re still in this pattern of getting a glimpse of something good one quarter and then a big shrug the next," said Josh Olson, an analyst at Edward Jones & Co. "Their strategy is right in terms of investing in their data and the technology running the platform, but I question the execution since we’re still in this period of fits and starts."

Wenig defended the company’s strategy on a call with investors, saying results won’t be even. EBay is differentiating itself by offering merchants a platform with 171 million shoppers from around the world at a time when brands are seeing sales in stores shrink and have reasons to be wary of Amazon. Amazon attracts more shoppers and spending, but it also sells its own private-label products, leading to concern among consumer companies that Amazon will copy them and steal customers.

"Brands are coming to EBay because the retail landscape is changing," Wenig said. "We don’t compete with our sellers. That’s very rare and very unique."

EBay wants to use artificial intelligence and augmented reality to personalize the shopping experience and make browsing the site more fun, which the company sees as crucial to inspiring purchases and discovery rather than just appealing to "mission shoppers" who know what they want before they arrive. The San Jose, California-based company is adding more home goods and apparel to attract younger shoppers and women, since the site’s shoppers skew to older men.

EBay is also weaning itself from longtime partner PayPal Holdings Inc. and has entered a new agreement with Dutch payments processor Adyen BV.

In the first quarter, EBay’s profit was 53 cents a share on revenue of $2.58 billion, according to a statement Wednesday. That was largely in line with analysts’ forecasts. Total gross merchandise volume, a key metric, rose 13 percent to $23.6 billion.

The shares fell as much as 7.2 percent to $38 in extended trading after closing at $40.97 in New York. EBay is up about 25 percent in the past 12 months, more than double the gains of the Standard & Poor’s 500 Index.

“They’re not comparable business models, but investors are still going to say in the e-commerce world you’re still losing ground to Amazon,” said Kerry Rice, an analyst at Needham & Co.

To contact the reporter on this story: Spencer Soper in Seattle at ssoper@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Dan Reichl

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