E-Commerce Outlook – Second Quarter 2008 Earnings – Part 3 – Overstock.com

It’s that time again, earnings season, where the huge net players not only post their financial results for the current quarter but forecast their outlook for the rest of the year. As the second quarter comes to a close and it grows more apparent that runaway energy costs and decreased confidence in financial institutions has taken a toll on economic growth, many pundits have wondered if the growth of e-commerce would be slowed or reversed by the greater economic landscape. Over the next two weeks I’ll take a look at the four companies, Google, eBay, Overstock, and Amazon to help us gauge where e-commerce is going in the next six to twelve months.

Today’s Spotlight:

Overstock.com announced earnings on Friday, July 18th, reporting losses of 6.5 million dollars on 188.8 million dollars in revenue (+27 percent YoY). Similar to eBay, Overtstock share price dropped dramatically after the announcement (- 15 percent the next trading day) depsite meeting analyst’s expectations for earnings. During the earnings call CEO Patrick Byrne reiterated confidence in the company’s ability to  deliver positive earnings by the end of the year.

CPC’s Thoughts- We shouldn’t read too much into Overstock’s earnings loss for two reasons. First, Overstock has not earned a positive profit since it went public. Second, Overstock’s marketing expenese (probably in the form of PPC since their TV exposure has definitely decreased in the past year) increased significantly during second quarter (+79% YoY or $14.2 million). With that said Overstock.com’s marketing focus on soft goods geared toward the 30-45 female demographic and limited brand cachet allows it to be a good barometer for the overall health of e-commerce as it relates to non-electronics merchants. While the current quarter shows positive signs it should be interesting to see if management can actually deliver on their promises of continued earnings/revenue growth in Q3 and Q4.