Etsy Surpasses Analysts’ Third-quarter Estimates, Issues Strong Guidance For The Fourth Quarter

Shares of e-commerce company Etsy soared as high as 10 percent in Wednesday’s extended trading after the company reported better-than-expected earnings results for its third quarter. The company also issued strong guidance for the ongoing quarter. 

For the third quarter, the company reported adjusted earnings per share of 58 cents, beating analysts’ expectation of 36 cents for third-quarter earnings, according to Refinitiv. Revenue for the quarter came in at $594.5 million, surpassing the expectation of $565 million that analysts had, according to Refinitiv. 

The company said that it expects revenue to come in between $700 million and $780 million in the fourth quarter, and gross merchandise sales of between $3.6 billion and $4 billion. Analysts’ estimates for revenue and gross merchandise sale are $743 million and $3.9 billion respectively, according to Refinitiv. 

In the third quarter, the e-commerce company reported a net loss of $963.1 million which included a goodwill impairment charge of $1.04 billion to write down the value of its acquisitions of fashion resale app Depop and Brazil-based marketplace Elo7, which it purchased for $1.62 billion and $217 million, respectively. Excluding the impairment charge, Etsy earnings were 58 cents per share, adjusted.

The company’s third-quarter revenue was up 11.7 percent year over year and received a boost from Etsy’s transaction fee hike. Last April, the company announced that it would increase the transaction fee it charges sellers from 5 percent to 6.5 percent. This decision received criticisms from sellers including a week-long strike. 

Companies like Amazon have caused investors to watch the e-commerce space closely. E-commerce businesses have been affected by customers’ reductions in spending, inflation, etc. Analysts expect a gloomy holiday season.  

“We don’t know whether consumers will spend more or less on gift giving, or whether they’ll do more shopping online or in the mall. But the good news is our business – with differentiated inventory across our House of Brands and a variable cost model – doesn’t depend upon us taking big bets on these questions in the same ways most other retailers or e-tailers must,” Etsy CEO Josh Silverman said in the company’s earnings release.

He also added that “…we are doing all we can to help make sure Etsy sellers have the best holiday season they can – particularly in the face of continued economic uncertainty.”