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eBay reports lack lustre Q118 earnings
The global marketplace eBay has made its financial report for the first quarter of the year on Wednesday after the close of the markets in New York. All the attention today in the news has been on Facebook. But there are other shows in town.
In the first quarter, according to the report, 171 million active buyers clicked to buy. GMS, gross merchandise sales, grew by 13% to $23.6 billion. Nothing shoddy about that, but analysts wanted a bit more.
You can spend a thrilling few minutes at your leisure reviewing the full quarterly results here in the PDF.
The CFO said of the results and future plans:
We are actively investing to build our product and capabilities related to intermediated payments and improving the customer experience. We expect the level of investment to increase over time.
– Scott Schenkel, eBay Inc. Chief Financial Officer
Quarterly results for any company come around with clockwork regularity. And obviously the first quarter is usually a bit lack lustre, especially in retail and ecommerce. But sometimes what you’re looking for is something new. And eBay still seems to be struggling there. Amazon constantly surprises, eBay seldom does.
That said, one of the reasons why eBay issued lowered targets for Q2 is that it is spending money and investing in new developments. The proof of that pudding will be when merchants see it and can appreciate that service is improving and delivering increased sales.
News of the Adyen deal, which will significantly change how sellers use the service when it comes to taking payments and getting disbursements, and which will be the biggest change to the marketplace in a decade, isn’t yet reflected in earnings. Testing has only just commenced, after all. But, that aside, there should be more and better news from eBay, really.
At Tamebay, we want eBay to flourish as a marketplace: it’s a vital player. But we are just not seeing signs of that right now. Sadly. Looking forward to more in the next few months.
for those who care..Im an equity analyst and founder of the largest TMT research boutique for investors…. here was my take on the results:
Heading into this Q EBAY was upgraded by an unusually large number of analysts. This came after our March note (see EBAY Challenges Mounting in 2018? Mar. ’18), where we maintained our $49 PT but suggested that there might be delays to seeing benefits from technology efforts. So, we wondered, did we miss a data point or key piece of news? Not evidently. We were $8m off the top line for EBAY in 1Q and our 2Q18 forecast of $2.66bn is at the mid-point of guidance. FCF margins were a disappointment, but the company claims this was due to timing of tax payments, while higher (flagged) costs for payments left margins down about 100bps yoy, but a minor change, and less of a change seq.. FX helped a lot, adding 600bps to Marketplace growth (7% u/l), Classifieds were +10% FX Neutral and StubHub +7% (with a good new hire as CEO when former CEO went to main EBAY). Against an easy comp in US (+4% in US in 1Q17) US Marketplace growth was just +7%. This was not an inflection point Q for growth – it will be a source of frustration to some investors than FX Neutral growth rates in Marketplace are not inflecting higher, but stuck at 7%, nor did active buyer growth rates pick up (mentioning “headwinds in core eBay”), but as usual, EBAY did buy back $1bn of stock, and has another $6.6bn to buy back.
There is a lot EBAY is working on: its slow burn rollout of payments, for one, which is clearly a focus given the $2bn revenue/$500m EBIT target for ’21 or later. The NFL now a partner for StubHub for next season, like the MLB partnership, though StubHub might see some pressure on take rates to do these larger revenue deals. Having contra-revenue is in marketing expense (under new GAAP standards), gives them more leeway to do promotions. Marketing spend should escalate over time but EBAY claims they don’t buy growth but are “trying a lot of new elements now.” They are also building their 1P ads business, claiming 200% growth which is masked by the winding down of 3P ads, and the fact that 1P ads will be used more to boost conversion. In terms of the Japan acquisition Giosis, they claim the business is getting millennial buyers and had no global supply, so it was at a tipping point. It won’t have a big impact on numbers this year. No comment re Walmart-Flipkart rumours (what a silly Q that was) but claims they have an exclusive deal as the importer and exporter of goods. The bottom line is that, as we wrote, there are a lot of execution challenges for eBay in 2018, and its not clear they are over-coming those to meaningfully accelerate the business.
Funny how ebay always sees it’s customers as just buyers. When in reality they are not.. sellers are ebays customers, and buyers belong to sellers. Until Ebay relaise that the key to success is happy sellers who want to provide ever greater levels of service, then they will fail to meet their potential.
All those tens of thousands of sellers all out their spreading their woes to those around, hardly a great advert for ebay is it? Oh and with tax evasion such a big thing right now…. the fact that ebay seems to be dragging its heels like they were tied down over dealing with it on a seller basis is shocking. Every month i report the same 20 sellers, posing as private sellers but blatantly not, highlighting each of the masses of listings they collectively have…. and failing to list as a business…. yet for the forth month running they are still there, still doing it, still listing as private sellers.
One has over 15k feedback, and by my quick calculations on there sales as far as i can see should be vat listed as well…. But still nothing from ebay.
So i pay my ebay business fees, pay my taxes, and then can’t compete with the low prices they have because im honest and they are not. I know their products, i know the company that supply them, how much they charge, how much to post….
Ebay dont care, strangely though they are loosing money on this point, very unlike ebay to ignore that!
Absolutely!!! Instead they just keep making us jump through hoop after hoop. The GTIN change may just be me out as all my products come without one and I’m not sure I’m ready to invest in them.
Listen to sellers…stop walking round with a big stick hitting the people that earn you money. The late delivery dispatch is a farce and I suspect pushed smaller item sellers off the platform whilst tightening margins for larger item sellers. The sharing details suspensions is ridiculous. We were suspended when someone asked for a free sample and we asked their address. Unfortunately, we had done this for 5 years before so not an easy habit to shake. Overnight our business was under threat. There was no malice on our part just an honest error but straight away a suspension.
Talk to sellers, listen to what they say. Don’t keep chasing the big brands and look after us we are the bread and butter
The late delivery dispatch was a concern, particularly as providing tracking details will be the new standard pretty soon.
As an experiment, we switched from ‘mark as dispatched’ to ‘add tracking’ for everything several weeks ago, to see what would happen to the late delivery report. As expected, it did increase the number of late deliveries recorded. The simple reason for that is, buyers can’t be bothered/can’t remember/give the benefit of the doubt when it comes to reporting when leaving feedback, whereas tracking will capture everything.
At one point, it had gone up to 2.8%. This was following the double bank holiday weekend, and Royal Mail, having got 2 extra days worth of mail to deliver, was clearly behind.
However, nearly all of these tracked and recorded late deliveries have since automatically been removed by ebay. The percentage is back well under 1%
We use click and drop, Royal Mail 24/48 services, so can add the details quite easily. Not everyone has that option, but you don’t have to be a big seller to do it either. For us, it is working and appears ebay have got things in place to make sure we don’t get penalised wrongly for late dispatch.
@Gav – I had the same concerns and have also switched on the update from Click & Drop.
Our LDR has gone up to 1.66% from 0.65%, but when I had it on before it did go up to over 3%
The bottom line is that Wenig’s Ebay is charging sellers more to sell on their platform, without justifying that with any real growth.
How much of Ebay’s supposed growth is actually just fee hikes?
Look over at Amazon and see the amazing results they’ve just announced.
Ebay is going round in a circle all the time and Wenig is betting the house (all Ebay sellers’ houses too!) on getting it right with his techno babble. If he gets it wrong, Ebay is finished.
Let’s hope he can focus on the job, in between his other new boardroom commitments at GM.
Great to see Wenig is so committed to Ebay. Looks like he’s already lining up his exit strategy.