Overstock (NASDAQ:OSTK) Misses Q3 Sales Targets
Online home goods retailer Overstock (NASDAQ: OSTK) missed analysts' expectations in Q3 FY2023, with revenue down 18.9% year on year to $373.3 million. Turning to EPS, Overstock made a GAAP loss of $1.39 per share, down from its loss of $0.81 per share in the same quarter last year.
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Overstock (OSTK) Q3 FY2023 Highlights:
Revenue: $373.3 million vs analyst estimates of $396.1 million (5.76% miss)
EPS (non-GAAP): $0.61 vs analyst estimates of -$0.72 ($1.33 beat)
Free Cash Flow was -$14.1 million compared to -$8.03 million in the previous quarter
Gross Margin (GAAP): 18.7%, down from 23.3% in the same quarter last year
Annual Active Customers: 4.9 million, down 0.9 million year on year
“Over the last three months, we have accelerated efforts to build a company with a bigger, brighter, and bolder future,” said Jonathan Johnson, Chief Executive Officer.
Originally launched as a website focusing on selling clearance sale electronics and home goods merchandise, Overstock (NASDAQ: OSTK) is a leading online retailer of home goods, primarily furniture.
Online Retail
Consumers ever rising demand for convenience, selection, and speed are secular engines underpinning ecommerce adoption. For years prior to Covid, ecommerce penetration as a percentage of overall retail would grow 1-2% annually, but in 2020 adoption accelerated by 5%, reaching 25%, as increased emphasis on convenience drove consumers to structurally buy more online. The surge in buying caused many online retailers to rapidly grow their logistics infrastructures, preparing them for further growth in the years ahead as consumer shopping habits continue to shift online.
Sales Growth
Overstock's revenue has been declining over the last three years, dropping on average by 1.77% annually. This quarter, Overstock reported a year on year revenue decline of 18.9%, missing analysts' expectations.
Ahead of the earnings results, analysts covering the company were projecting sales to grow 3.98% over the next 12 months.
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Usage Growth
As an online retailer, Overstock generates revenue growth by expanding its number of buyers and the average order size in dollars.
Overstock has been struggling to grow its active buyers, a key performance metric for the company. Over the last two years, its buyers have declined 26.9% annually to 4.9 million. This is one of the lowest rates of growth in the consumer internet sector.
In Q3, Overstock's active buyers decreased by 0.9 million, a 15.5% drop since last year.
Key Takeaways from Overstock's Q3 Results
With a market capitalization of $691.6 million, Overstock is among smaller companies, but its more than $325.4 million in cash on hand and near break-even free cash flow margins puts it in a stable financial position.
We struggled to find many strong positives in these results. Its user base fell and its revenue growth was quite weak. Overall, the results could have been better. The company is down 1.96% on the results and currently trades at $15 per share.
Overstock may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
