Earnings Results: Etsy shares surge on second-quarter earnings beat

Daily Trade

Etsy Inc. reported its second-quarter results after market close on Wednesday, posting better-than-expected earnings and gross merchandise sales in line with Wall Street’s forecast.

Buoyed by the results, Etsy Inc.’s
ETSY,
+2.36%

shares gained 10.3% in aftermarket trading, after ending regular trading up 2.4% to $95.50.

The online-marketplace company reported second-quarter net income of $73.1 million, or 51 cents a share, compared with net income of $98.3 million, or 68 cents a share, in the year-ago quarter. Etsy said the net income decline was primarily due to increased employee compensation-related expenses, with total employee headcount increasing approximately 70% year-over-year following the acquisitions of Depop and Elo7. Analysts polled by FactSet expected Etsy to report net income of $47 million and earnings of 32 cents a share.

Etsy said it had gross merchandise sales of $3.01 billion, in line with Wall Street’s expectations, and down 0.4% from $3.04 billion in the same period last year. Sales were $585.1 million, up from $528.9 million in the prior year’s quarter. FactSet consensus was for sales of $556 million.

See Now: Etsy is setting its sights on male shoppers

The company’s Marketplace revenue was $439.5 million, compared to $395.5 million in the year-ago quarter, and above the FactSet consensus of $416 million. Services revenue was $145.6 million, up from $133.4 million in the prior year’s quarter. Analysts surveyed by FactSet had forecast services revenue of $143 million.

However, the company cited the impact of macro headwinds that include pressures on consumer discretionary spending, reopening, foreign exchange-rate volatility, and ongoing geopolitical uncertainty.

“Our second-quarter results once again reflect that Etsy has maintained most of our pandemic gains, and that we are able to deliver strong bottom-line performance while simultaneously investing in key initiatives,” said Etsy CEO Josh Silverman, in a statement. “Despite facing headwinds caused by macroeconomic and geopolitical factors, we believe the improvements we’ve driven in customer experiences across the Etsy marketplace and our House of Brands, coupled with continued focus on our ‘Right to Win’ strategy, will enable us to unlock the enormous long-term opportunities we see ahead.”

Etsy gave third-quarter gross merchandise sales guidance of $2.8 billion to $3.0 billion. Analysts tracked by FactSet had forecast $3.08 billion. For the third quarter, Etsy expects revenue of $540 million to $575 million. FactSet’s consensus is third-quarter revenue of $568 million.

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Speaking during a webcast to discuss the results late Wednesday, Silverman said that Etsy continues to experience changes in the global economy. “Disposable income is under more pressure than it has been in a long time,” he said.

The CEO acknowledged that “it’s not an easy time for the world,” but said that, even in downside scenarios, Etsy is well positioned to deliver healthy profitability.

Concerns about slowing consumer spending have swirled around Etsy in recent weeks, prompting a number of analysts to cut their price targets for the company.

Last week, in an earnings preview, Truist Securities adjusted its Etsy estimates lower to reflect FX headwinds and the risk of a mild recession in 2023. “On the one hand, nearly all of Etsy’s GMS is discretionary consumer spend, which tends to get hit in a recession,” wrote Truist Securities analyst Naved Khan. “On the other hand, Etsy’s relatively low average ticket size and differentiated products could make it more resilient in a recession than higher AOV [Average Order Value], less differentiated categories, such as home wares or fitness equipment.”

As the company eyes growth opportunities, Etsy is also setting its sights on male shoppers. About three-quarters of the company’s shoppers in the U.S. and U.K. are women.

Shares of Etsy have declined 56.4% this year, outpacing the S&P 500 Index’s
SPX,
+2.62%

fall of 15.6%. The Dow Jones Industrial Average
DJIA,
+1.37%

has fallen 11.4%.

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