Why Overstock CEO is not concerned about Q1 revenue drop

SALT LAKE CITY – Revenue for e-commerce retailer Overstock came in at $536 million for the first quarter ending March 31, representing a 19% decrease from last year’s figure of $659.8 million.

“We delivered our eighth consecutive quarter of profitability in line with our stated adjusted EBITDA margin targets, even in a difficult macro environment,” said Jonathan Johnson, Overstock CEO. “While the 19% revenue decline was more than we expected, I am pleased that, based on third-party data, we held our market share consistent with Q4 levels.”

Gross profit for the fourth quarter was $125.2 million or 23.4% of total net revenue compared with $153.5 million in the first quarter. The company’s diluted earnings per share was 21 cents for Q1, compared to 33 cents for last year’s first quarter.

“We anticipated the first quarter would be difficult considering the significant acceleration in sales last year driven by both operational improvements and pandemic-related factors,” Johnson added. “What we could not have anticipated was the magnitude of the impact of inflation coupled with an adverse geopolitical environment, which ultimately impacted consumer sentiment.”

On the call with investors, Johnson said that looking ahead he believes the company’s unique business model positions it to favorably navigate through various macro scenarios and continue to take market share. “Our business is asset-light, and our smart value brand pillar delivers value that motivates our customers to buy from us even when their wallets are stretched,” he said.

He added that inflation turns people into savvy shoppers who are looking for smart value. “Our home business took off in 2008 and 2009 during the recession. We do well in inflationary environments when budgets are pinched,” Johnson said. “In spite of inflation, people are still buying homes, which is good. They will need to buy furniture. Home prices remain strong.”

The company will exit out of its remaining non-home categories, which include jewelry and watches, during the second quarter, which will have an impact on profitability, according to Johnson. But he said that over time the average order value for home shoppers will replace any business lost from exiting all non-home categories, so that is why the company is “strategically focused on serving the home category with an immense breadth and depth of products.”

While not offering specific guidance for the upcoming quarters, Johnson said Q3 is historically the best quarter for the company and Overstock is anticipating revenue growth in the single digits for the full 2022 fiscal year.

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