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Key Takeaways
- Shares of e-commerce company Etsy fell sharply Thursday after the company released disappointing quarterly earnings after the bell Wednesday.
- Etsy’s financial performance was in line with analysts’ estimates, but total sales on the platform decreased year-over-year.
- CEO Josh Silverman said Etsy is operating in a “challenging environment” as consumers opt for the least expensive option for many products.
Shares of Etsy, Inc. (ETSY) plummeted in Thursday morning trading after the e-commerce retailer reported quarterly earnings that came in short of expectations after markets closed Wednesday.
The stock was down 14.4% at $59.69 at around noon ET, after falling as much as 19% early in Thursday’s session to its lowest intraday level in four years.
While the number of active buyers on the site increased nearly 2% compared to the first quarter of 2023, gross merchandise sales (GMS) across the marketplace fell to $2.99 billion from the $3.10 billion Etsy reported last year.
Etsy reported first-quarter revenue of $645.95 million, up less than 1% from a year earlier and matching analysts’ estimates compiled by Visible Alpha. Income was also in line with estimates at $63 million, with diluted earnings per share (EPS) of 48 cents per share coming in one cent above estimates, but the numbers fell from $74.54 million and 53 cents per share in the year-ago quarter.
Sluggish Spending Is Headwind For Growth
Chief Executive Officer Josh Silverman said in the report that the company has been “pressured by the challenging environment” of consumers pulling back spending on discretionary products such as those Etsy’s marketplace specializes in, which “continues to be a headwind to Etsy marketplace growth,” Silverman said.
Etsy laid off about 11% of employees in December, as the company has struggled to retain consumer interest in what Silverman called the “sea of sameness in e-commerce.” Inflation has led many consumers to search for the best possible price for a product, whether it is through Etsy or another online retailer such as Amazon (AMZN) or PDD Holdings’ (PDD) discount platform Temu.
Online shopping, and Etsy’s share price, boomed during the pandemic as people had to shop online amid lockdowns. In November 2021, Etsy approached $300 per share, but has been largely on the decline since that pandemic peak.
Etsy projected that GMS for the current quarter would be similar to the first-quarter numbers, with the possibility of a low- to mid-single digit decline. For the full year, however, the company said it currently expects a “modest acceleration” in GMS over the second half of 2024 compared to the second half of 2023.