Etsy’s stock saw a significant jump Thursday following the announcement of its strategic divestiture of Depop, the fashion resale app, to rival eBay for approximately $1.2 billion in cash. This move, coupled with the company’s fourth-quarter earnings report, paints a picture of a company sharpening its focus on its core e-commerce operations.
The online marketplace reported mixed financial results for the fourth quarter. While earnings per share (EPS) of 92 cents surpassed analyst expectations of 84 cents, revenue slightly missed the mark, coming in at $882 million against an estimated $885 million.
Gross merchandise sales (GMS), a key indicator of platform activity, experienced a 3.8% year-over-year decline, reaching $3.59 billion. This figure fell short of the $3.6 billion anticipated by analysts. Etsy attributed this downturn primarily to the prior sale of its musical instrument marketplace, Reverb.
Despite the slight revenue miss and GMS dip, the Depop deal dominated market attention. Etsy CEO Kruti Patel Goyal emphasized that the sale would enable the company to “focus exclusively” on its main marketplace. This strategic pivot suggests a move to streamline operations and allocate resources more effectively towards its handcrafted and artisan goods platform.
For eBay, the acquisition of Depop is seen as a complementary move that strengthens its position in the burgeoning fashion resale market, a category that has demonstrated rapid growth for the company. Depop’s appeal among younger consumers aligns with eBay’s efforts to capture a broader demographic. Consequently, eBay shares also experienced a positive trend on Thursday.
Digging deeper into Etsy’s fourth-quarter performance, net income saw a 14.8% year-over-year decrease, settling at $110.7 million, or 92 cents per share, down from $129.9 million, or $1.03 per share, in the same period last year.
Etsy has been navigating a complex market landscape characterized by increased competition in the online retail sector and challenging macroeconomic conditions. The company’s annual filing highlighted pressure from a general pullback in consumer discretionary spending and “evolving buyer behavior.”
On a more positive note, Etsy reported growth in its seller base, with active sellers increasing by 7.7% year over year to 8.76 million, exceeding the 8.5 million estimated by analysts. However, active buyers saw a slight decline of 2% year over year, reaching 93.54 million, which was marginally above the 93.1 million projected by Wall Street.
Looking ahead to the first quarter, Etsy provided guidance for GMS to range between $2.38 billion and $2.43 billion. This projection anticipates a decrease compared to the $2.8 billion in GMS recorded in the prior year’s first quarter, and falls below the analyst consensus of $2.68 billion. This forward-looking guidance suggests a period of recalibration as the company integrates its strategic decisions and adapts to market dynamics.
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