The pressure is there
to deliver on Wednesday when it reports its second quarter results. And the online crafts retailer believes it can – confident the pandemic growth spurt is here to stay.
For the second quarter, executives forecast revenue of $493 million to $536 million, up 15% to 25% year over year, but less than the $551 million in the first quarter.
Analysts have taken company officials to work, expecting
(ticker: ETSY) to report on the top of their guidance. Wall Street expects revenue of $525 million, up from $429 million a year ago, and EPS of 63 cents, up 75 cents.
The executives also believe that the company can keep most of the gross profit amassed during the pandemic. For the first quarter of 2020, which ended shortly after the lockdown began, Etsy reported gross merchandise sales of $1.35 billion. The first quarter of this year brought in $3.14 billion in gross merchandise sales, and the second quarter forecast isn’t far off: $2.8 billion to $3.1 billion.
Maintaining gross profit from merchandise sales will be tantamount to retaining high-spending customers. In the first quarter, the company reported a 205% year-over-year increase in buyers who made six or more purchases and spent more than $200 in the past 12 months. Although it is only 9% of buyers, the group accounts for 40% of gross merchandise sales. A key concern is whether those consumers would prefer the retail shopping experience, which may be more conducive to impulse purchases.
The online e-tailer has made a number of major purchases itself. In late June, Etsy announced it would pay $217 million in cash for Brazil-based Elo7, a peer-to-peer e-commerce marketplace. A few weeks earlier, Etsy acquired Depop, a British fashion reseller platform, for $1.63 billion.
Wedbush Securities analyst Ygal Arounian expects the acquisitions to dilute margins in the near term, but he believes the deals will increase the company’s international presence and enable it to capitalize on emerging e-commerce trends.
While e-commerce companies have had a strong year so far, investors are closely watching how they navigate the changing economic landscape. Last week eg.
exceeded earnings expectations but fell just short of revenue expectations, forcing investors to wipe 7.4% of the company’s market cap the following day.
Arounian believes the increase in Covid cases could create favorable conditions for digital commerce growth, but the reopening could limit upside potential in the third quarter.
Even if Etsy beats earnings and revenue expectations, the question remains whether that will be good enough to allay concerns that ecommerce platforms will cede ground to retailers when the economy reopens.
shares rose 0.2% to $189.29 in afternoon trading Tuesday; the
increased by 0.5%.
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