EBay Sales, Forecasts Miss Estimates as PayPal Growth Slows

EBay’s Sales Miss Estimates After Consumers Cut Online Spending
Shares of EBay Inc., based in San Jose, California, dropped as much as 3.7 percent to $54 in extended trading. Photographer: David Paul Morris/Bloomberg

EBay Inc. reported first-quarter revenue that missed some analysts’ estimates and forecast disappointing sales and profit for the current period as weakness in Europe weighs on growth at its PayPal unit.

First-quarter sales were $3.75 billion, the company said yesterday in a statement. That fell short of the $3.77 billion average of analysts’ estimates, according to data compiled by Bloomberg. Second-quarter revenue will be $3.8 billion to $3.9 billion, shy of the average prediction for $3.95 billion.

PayPal’s sales growth decelerated to 18 percent in the first quarter from 32 percent a year earlier. The online-payment unit took in less money from each transaction, hurt by an economic slowdown and weaker currencies in Europe, EBay said. Sluggish growth abroad may continue to affect the company in the second quarter, said Gil Luria, an analyst at Wedbush Securities Inc. in Los Angeles.

“There appears to be a global slowdown, and EBay has not been able to escape it,” Luria said in an interview.

Shares of EBay, based in San Jose, California, fell 5.8 percent to $52.82 at the close in New York, the steepest decline since September 2011. The stock has gained 3.6 percent so far this year, compared with an 8.1 percent rise in the Standard & Poor’s 500 Index.

The company forecast second-quarter profit, excluding some items, of 61 cents to 63 cents a share, versus a 66-cent average analyst estimate.

European Slowdown

“We expect a weaker Europe and British pound versus the full-year guidance we gave you in January,” Chief Financial Officer Bob Swan said on a conference call. “Europe was a little bit slower than last year, than we expected coming into the year.”

The pound declined about 6 percent against the dollar in the first three months of the year, while the euro fell 2.8 percent.

The International Monetary Fund in January cut its forecast for the euro area, saying the economy there will contract by 0.2 percent in 2013. It had previously predicted a 0.2 percent expansion.

First-quarter profit before some costs was 63 cents a share, compared with the 62-cent average analysts’ projection. Net income rose to $677 million, or 51 cents a share, from $570 million, or 44 cents, a year earlier.

Chief Executive Officer John Donahoe has been working to revive growth in EBay’s online market hub by creating mobile applications to attract younger users, investing in emerging markets and teaming up with retailers to get goods to consumers faster. The company also revamped its website and has begun personalizing users’ home pages based on buying history.

Marketplaces Revenue

For the first quarter, sales in the marketplaces division rose 13 percent to $1.96 billion. Donahoe has driven growth in that segment, which brought in 54 percent of 2012 sales. Marketplaces revenue declined 18 percent from the first quarter of 2008 to the same period in 2009, the first year of his tenure.

At PayPal, revenue rose to $1.55 billion in the first quarter. The unit gained 5 million registered users, bringing the total to 128 million. Net payment volume, or the total value of transactions processed, rose 21 percent to $41 billion. PayPal’s take rate, or the average amount the company takes from each transaction, fell to 3.77 percent from 3.87 percent in the same period a year ago.

EBay said general merchandise volume in the U.S., or the total value of goods sold in the marketplace, rose 16 percent to $7.36 billion, as more customers bought items on mobile devices and the company focused on emerging markets.

New Regions

“The core business is just doing really well,” Ron Josey, an analyst at JMP Securities in Washington, said in an interview. “They are expanding overseas and taking share in emerging markets where they haven’t really been before.”

As part of a push into new regions, the company said it debuted a Russian-language site in the first quarter, with a focus on fashion. A television marketing campaign is debuting in the second quarter in the country, which posted a 75 percent surge in EBay users last year. EBay will have to navigate a culture that primarily uses cash for online transactions and has a fragmented, slow-moving shipping industry.

Still, the new site is seeing growth, Donahoe said on the call.

“The first couple weeks since our Russian site launch, we’ve had strong acceleration of new users, and those new users are beginning to buy,” he said.

EBay’s mobile payment volume will exceed $20 billion in 2013, as will PayPal’s, the company said in January.

2015 Forecast

Last month, EBay forecast 2015 sales that topped analysts’ estimates and said it expects the total volume of merchandise sold in its marketplace to reach $110 billion by that year as the online retailer adds users and mobile tools. Revenue in 2015 will be $21.5 billion to $23.5 billion, the company said.

EBay yesterday repeated its forecast for 2013 revenue of $16 billion to $16.5 billion and earnings per share of $2.23 to $2.29. While analysts such as Wedbush’s Luria and Daniel Kurnos at Benchmark Co. say the slowdown in Europe may persist, Donahoe said he doesn’t expect it to weigh on full-year earnings.

“It’s a little weaker, but we didn’t change full-year guidance,” the CEO said in an interview. “It’s not so weak that we think it’s a material impact.”


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