A Tale Of Two E-Tailers
It was the worst of times, and … yeah, it was just the worst of times. Such is life for the modern retailer, and as we found out today, e-tailers too.
Very original, Great Stuff. Aren’t you just the Dickens… Now what’s an e-tailer?
What, you’ve never visited the electronic tailor? Sheesh, you kids…
Welcome to Thursday, Great Ones! Today’s Throwdown is truly as its name suggests: a throwdown of tremendous proportions. A no-holds-barred barrage of online shopping blunders. A clobbering amid the e-commerce cabal, if you will.
As the latest slate of earnings reports shows, all is not well on the e-commerce front. And if it could happen to Amazon.com (Nasdaq: AMZN), it could happen to … well … any other online shopping site.
Get a load of this:
• Etsy (Nasdaq: ETSY)? Down 17%.
• eBay (Nasdaq: EBAY)? Down 12%.
• Shopify (NYSE: SHOP)? Down 16%.
• Wayfair (NYSE: W)? Down 25%.
Join me now in a rousing chorus: Ooooooof.
So what’s the hubbub, bub? Why is basically every e-commerce company circling the drain today? Well … more than the rest of the market, at least.
By all accounts, Etsy and eBay both beat their respective earnings and revenue expectations — not by much, mind you, but a double beat is a double beat, right?
Current-quarter guidance, however, is a whole different tale. And it’s not what e-commerce investors wanted to hear.
For its part, eBay expects this quarter’s revenue to slouch down 9% to $2.4 billion at best, while analysts expected $2.54 billion. Etsy’s worse for wear, predicting its merchandise sales to land between $2.9 billion and $3.2 billion, while Wall Street wants $3.4 billion.
Etsy CFO Rachel Glaser said general merchandise sales started slipping in February and then worsened throughout the quarter. Glaser also notes: “To be sure, it’s been a bit of an unpredictable and volatile start to the year.”
You don’t say, Rachel. You don’t say…
What’s with the sudden pessimism? Anybody got a hunch why online shopping could be down across the board? Any ideas at all?
Pssst. I’ll let you in on a little secret. It’s probably because a lot of people are broke.
I’m not going to speak for all y’all — we have the inbox for that — nor will I fall for the classic blunder of underestimating the desire to overspend.
But if people are feeling the pain over inflated gas, food and rent prices, where do you think that “disposable income” is going?
Probably not on Etsy or eBay.
Last I checked, you couldn’t get groceries or refuel your car on either site. (They’ve gotcha covered on water bottle stickers, though…)
Since it’s been such an “unpredictable and volatile start to the year,” your average consumer is probably going to spend more of their barely growing paycheck to, you know, sustain life. Well, at least I should hope…
Don’t get me wrong: Consumer spending isn’t falling off the cliff just yet … but the cliff is in sight.
Extraneous purchases — such as the garage sale wares you’d find on eBay or the crafts on Etsy — are usually the first part of the budget to be reallocated.
Besides, y’all weren’t expecting that pandemic-propelled online shopping spree to last forever, did you?
But the e-commerce crunch, as talking heads are calling it, isn’t stopping at just Etsy and eBay…
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Not that long ago, we were looking into a possible re-entry point for Canadian e-commerce guru Shopify, which provides platform solutions for small- and medium-sized businesses around the world.
Essentially, Shopify makes tools that help companies sell their products online — a business model that became the e-commerce equivalent of rolling triple 7s at the casino during the height of the pandemic.
But like most degenerate gamblers, once people got a taste of those sweet stimmy check “winnings” … they couldn’t just walk away.
Save money for a rainy day, you say? Nah… I’m gonna blow every last penny I’ve got on this great goose lamp and an air fryer that I’m definitely, maybe (but probably not) gonna use once.
Multiply that mind-numbing, pandemic-induced boredom by roughly two years … and yeah, it’s safe to say a lot of people weren’t properly prepped for the steaming pile of inflation that inevitably came their way.
Enter Shopify’s most-recent quarterly report.
Turns out it’s kinda hard to make platform kickbacks when everyone suddenly starts hoarding their money for everyday essentials. And while Shopify didn’t suffer nearly as bad as other retail-adjacent companies … it didn’t meet Wall Street’s lofty expectations for the quarter either.
Earnings per share came up $0.43 short of projections. And revenue — while growing 22% year over year to $1.2 billion — couldn’t scrape the Street’s $1.24 billion goal.
But hey, Shopify did manage to acquire fulfillment service company Deliverr for $2.1 billion in cash and stock equivalents … so now it can help big-name companies like Amazon, Walmart and eBay deliver goods whenever people start purchasing stuff again.
Funny, though … as I thought Amazon was my new shipping overlord. Hmm…
Needless to say, we’re glad we dodged this rogue retail bullet, as SHOP stock is down 16% after signaling more inflationary pain to come.
Oh, Wayfair … always the last lass picked at the digital retail dance, aren’t you?
Things have gone from worse to … well, Wayfair since the last time we mentioned this femme fatale of furniture and home décor.
For those of you who thought Loop Capital’s analyst attack was savage the other month … clearly you haven’t looked through Wayfair’s latest earnings report yet.
Lemme help you out:
• Wayfair reported an earnings loss of $1.96 per share versus a loss of $1.56 per share expected.
• Sales were down 14% to $2.99 billion from $3.48 billion a year ago.
• Active customers declined 23.4% year over year.
• Orders from repeat customers also fell 26%.
And those are just the highlights, Great Ones.
Now, Wayfair wants investors to think that supply chain constraints and order delays are the main culprits behind its busted performance.
But in truth, all those new home furnishings that people gorged themselves on during the pandemic completely wiped out Wayfair’s target market.
And with people returning to offices once again … what’s the point in spending a &%*^ton of money on new home décor when you’re not actually home to enjoy it?
There’s a lot more to this story than shipping delays, my dudes — and don’t let anyone tell you otherwise. With weak earnings and even weaker prospects, Wayfair stock is starting to look a lot like a falling knife.
Do yourselves a favor and don’t try to catch this one … not even as a bargain buy. But do let me know your thoughts in the inbox!
What’s your take on today’s e-commerce calamity? How has your online shopping changed in the past few months … if at all?
Write to us whenever the market muse calls to you! GreatStuffToday@BanyanHill.com is where you can reach us best.
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Until next time, stay Great!
Editor, Great Stuff
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We’ll see you tomorrow, Great Ones.