EBay Rattles Investor Faith With Slow Merchandise GrowthBy
Profit forecast in the current quarter misses estimates
Number of new shoppers was the same as previous period
EBay Inc. shook investor confidence with slow growth in activity across its marketplace and a lackluster forecast, highlighting its ongoing struggle to emerge from the shadow of e-commerce leader Amazon.com Inc.
Initiatives designed to help EBay stand out among online shopping sites had raised expectations with investors, who had pushed the company’s stock up 16 percent in the past three months. But the company on Thursday reported gross merchandise volume, the value of all goods sold, increased 3 percent to $21.5 billion in the second quarter, a marginal gain from 2.4 percent growth in the previous period. Its platforms attracted 2 million new buyers in the period ended June 30 -- the same number as the previous quarter -- for a total of 171 million global active buyers.
EBay Chief Executive Officer Devin Wenig has committed to a “structured data” initiative with the goals of making it easier to navigate the site’s 1 billion listings, giving EBay more prominent placement in Google searches and providing merchants greater insights about hot-selling products and prices.
“Investors have been very patient waiting for structured data to have a meaningful impact, and we just haven’t gotten it yet,” said Aaron Turner, an analyst at Wedbush Securities Inc.
EBay forecast adjusted profit in the current quarter of 46 cents to 48 cents a share, compared with analysts’ average estimate of 49 cents. Revenue will be $2.35 billion to $2.39 billion, the San Jose, California-based company said in a statement. Analysts projected $2.32 billion, according to data compiled by Bloomberg.
EBay’s shares declined as much as 7.7 percent in extended trading after the earnings announcement.
Wenig is trying to differentiate EBay in an industry dominated by Amazon, which has about double the customers, more web traffic and faster sales growth. Adding to the pressure are big investments by Wal-Mart Stores Inc. to expand its e-commerce business as shoppers defect from stores to buy more online.
The challenge is convincing investors smitten with Amazon that e-commerce isn’t a winner-take-all game. Shoppers keep shifting their spending from stores to websites, giving EBay fuel for growth even if Amazon expands more quickly. Online spending will increase 16 percent this year -- more than four times the pace of overall retail -- to reach $462 billion, according to EMarketer Inc.
In June, EBay announced a price-match guarantee on more than 50,000 items to lure bargain hunters to its site. It’s rolling out free three-day shipping on millions of products this year to compete with Amazon’s two-day shipping pledge to subscribers of its $99-a-year Prime membership. EBay emphasized its free shipping without a membership fee during a July marketing campaign designed to snag business on Amazon’s annual Prime Day sale.
“There’s a lot of good stuff happening at EBay, but a lot of these changes took place late in the quarter,” said Ron Josey, an analyst at Jmp Securities. “It will take some time for these changes to show on the books.”
Second-quarter profit was 45 cents a share on revenue of $2.33 billion, compared with analysts’ projections of 45 cents on sales of $2.31 billion. Revenue from StubHub, EBay’s tickets marketplace, gained 1 percent to 227 million, compared with a 15 percent year-over-year increase in the previous quarter.