EBay Falls Most in Six Months Amid Struggles With Turnaround
(Bloomberg) -- EBay Inc. fell the most in six months after reporting sales growth that continued to lag behind the e-commerce industry and showing it didn’t narrow the gap with giant Amazon.com Inc.
The results failed to sustain investor enthusiasm that the company’s turnaround efforts to make it a go-to site for unique items not found on Amazon were working. Chief Executive Officer Devin Wenig’s decisions to increase spending on marketing, redesign EBay’s homepage to personalize products for each visitor and make it easier for users to navigate the site’s 1 billion listings produced a sales gain of 3.7 percent in the first quarter, similar growth to the prior period.
“They continue to struggle to show consistent results,” said Josh Olson, an analyst at Edward Jones & Co. “Last quarter was promising and we’re back to uninspiring results this quarter. We’re back to inconsistency.”
The shares fell as much as 4.5 percent to $32.32 in New York Thursday, the biggest intraday decline since October. The stock had gained 14 percent this year through Wednesday.
Revenue in the current quarter will be $2.28 billion to $2.32 billion, San Jose, California-based EBay said Wednesday in a statement. Analysts on average estimated $2.32 billion, according to data compiled by Bloomberg. Adjusted earnings per share will be 43 cents to 45 cents, compared with analysts’ projections of 47 cents.
First-quarter profit was 49 cents per share on revenue of $2.22 billion. Analysts estimated 48 cents on sales of $2.21 billion, according to data compiled by Bloomberg.
“While EBay is certainly providing initial signs of a turnaround, we need to see results start to come better than simply par performance,” said James Cakmak, an analyst at Monness Crespi Hardt & Co. “At the end of the day, they are still losing share versus the broader e-commerce market.”
The company gained 2 million active buyers in the first quarter to 169 million, a 4 percent gain from the period a year earlier. Gross merchandise volume, which is the value of goods moved through transactions, gained 2.4 percent to $20.9 billion, about the same growth as the previous quarter.
The company is looking to speed up sales growth, which has lagged behind that of e-commerce leader Amazon and faces increasing pressure as Wal-Mart Stores Inc. invests in online sales. Shoppers are continuing to shift their spending from stores to websites. E-commerce spending in the U.S. will represent 13.9 percent of all retail sales in 2021, up from 9.2 percent this year, according to estimates from EMarketer.
EBay plans in the next several months to introduce a three-day delivery guarantee on millions of products. That’s slower than Amazon’s two-day delivery offered for Amazon Prime shoppers who pay $99 a year to subscribe to the fast shipping program.
The company also is looking abroad and earlier this month invested $500 million in Flipkart Online Services Pvt. that is part of a partnership with the e-commerce leader in India that allows merchants to offer products on both websites. The Flipkart deal is an example of EBay’s effort to increase cross-border online commerce as another way of surviving in a world dominated by Amazon.
StubHub, the company’s event ticket marketplace, gained 6 percent in gross merchandise volume to $916 million. EBay’s take-rate -- the amount it keeps from each transaction -- is about three times larger for StubHub ticket sales than it is for general merchandise sold on its marketplace.
Despite the muted first-quarter results, EBay affirmed its annual outlook, indicating it anticipates finishing the year stronger than it began. Wenig told investors the company expects to make “significant progress redefining the EBay experience and brand.”
“It takes a lot to turn a ship like this around,” said Aaron Turner, an analyst at Wedbush Securities Inc. “Investors realize this, which is why it’s not getting punished more.”