Etsy Reports Profit for First Time Since 2016 Amid Cost CuttingBy
Etsy Inc., the marketplace for unique and handmade goods, reported a profit for the first time since the first quarter of 2016.
The company posted net income of $11.7 million, or 10 cents a share, in the three months ended June 30, up from a loss of $7.3 million in the same period a year earlier. Analysts on average expected a loss of 4 cents a share. Second-quarter revenue rose 19 percent to $101.7 million, compared with the average analyst estimate of $101.3 million. Etsy also said growth in gross merchandise sales, the total value of goods that goes through its platforms, will be higher in the third quarter than the 12 percent increase in the second quarter.
Brooklyn-based Etsy has gone through a few tumultuous months after investor pressure led the company to shake up the management team and streamline costs. The same day Etsy was set to report earnings in the first quarter, Black-and-White Capital LP disclosed a 2 percent stake and called on the company to cut operating costs and increase revenue faster. During the preceding few months, the hedge fund had been trying to get Etsy to make changes, including separating the roles of chief executive officer and chairman.
Later that day, Chad Dickerson, who led the company for six years and took it public, stepped down from the board and the CEO post. Etsy also said it would eliminate 80 jobs. In June, Etsy announced another round of job cuts, affecting 15 percent of its workforce.
Etsy said it expects $35 million in annualized savings as a result of the headcount reductions, reduced third-party expenses and programming costs.
Growth in gross merchandise sales had been slowing, so Etsy began focusing on providing more services to artisans and merchants who sell on the website to supplement revenue growth. This segment now accounts for more than half of the company’s revenue. But analysts say marketplace commerce is still fundamental to the health and future potential of the company.
Etsy cut its 2017 forecast on two key metrics. GMS is expected to grow 12 to 14 percent this year, the company said in a statement late Thursday. That was lowered from a range of 15 to 17 percent provided in February. Etsy said revenue growth will be 18 to 20 percent, down from a previous forecast of 20 to 22 percent.
Shares gained 4.5 percent in extended trading after closing Thursday at $13.59. The stock has increased 15 percent this year.
Black-and-White has also suggested that Etsy consider selling itself. After the hedge fund took its campaign public, TPG Capital and Dragoneer Investment Group disclosed that they control 8 percent of the company and have contacted Etsy to discuss “strategic alternatives.”