Etsy's Quarterly Sales Miss Estimates, Sending Shares Tumbling

(Bloomberg) -- Etsy Inc. reported second-quarter sales that missed analysts' estimates, as demand for its unique, creative goods failed to pick up in the second quarter after a “soft start” to the year.

The Brooklyn, New York-based company reported revenue rose 37% to $181.1 million, compared with projections for $183 million. Profit excluding some costs rose 43% to $39.7 million, in line with the average estimate of $39.6 million. The shares fell 7% in extended trading.

Etsy raised its full-year outlook for gross merchandise sales. The company now sees growth of 20% to 22% in that metric, up from 18% to 21%. The company sees revenue increasing 32% to 34%, or as much as $809 million, up from a previous view of growth of as much as 32%.

Key Insights

• Chief Executive Officer Josh Silverman has been credited with leading the company's turnaround over the past two years, shepherding moves such as investments to improve buyers' experience on the site and keep them coming back for more. That in turn has lowered customer acquisition costs. More than 80% of Etsy's gross merchandise sales, a key metric for e-commerce platforms, come from existing buyers, according to Bloomberg Intelligence.
• Gross merchandise sales were $1.1 billion in the quarter, up 21%.
• Net income rose to $18.2 million from $3.3 million, a year earlier.
• Etsy's shares have soared more than 40% this year after the company beat analysts' estimates in the fourth quarter.

Know More

• Earlier this month, Etsy announced a $275 million deal to purchase Reverb Holdings, a marketplace for used and new musical goods, in a bid to further expand its user base. The acquisition will add the untapped market of music gear to its portfolio. The transaction is expected to close by the fourth quarter of 2019.
• Etsy jumped on the free shipping bandwagon in the US, when it said in early July that it would provide its sellers with tools to be able to guarantee free shipping on orders above $35. This should help convince buyers to complete their transactions rather than leaving items in the cart, analysts said.
• Read the earnings statement here.

To contact the reporter on this story: Simran Jagdev in Toronto at sjagdev1@bloomberg.net

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

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