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Overstock (NASDAQ:OSTK) Misses Q4 Sales Targets


Radek Strnad /
2022/02/23 6:13 am EST
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Online home goods retailer Overstock (NASDAQ: OSTK) fell short of analyst expectations in Q4 FY2021 quarter, with revenue down 10.4% year on year to $612.6 million. Overstock made a GAAP profit of $32.9 million, improving on its profit of $10.1 million, in the same quarter last year.

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Overstock (OSTK) Q4 FY2021 Highlights:

  • Revenue: $612.6 million vs analyst estimates of $643.9 million (4.86% miss)
  • EPS (non-GAAP): $0.36 vs analyst estimates of $0.26 (39.8% beat)
  • Free cash flow was negative $5.99 million, compared to negative free cash flow of $24 million in previous quarter
  • Gross Margin (GAAP): 22.6%, up from 22.3% same quarter last year
  • Annual Active Customers: 8.1 million, down 1.1 million year on year

"This is our second consecutive year of profitability and market share growth," said Overstock CEO Jonathan Johnson. "For the full year 2021, net revenue increased 11% against record 2020 growth. The foundational operational improvements we have made over the past two years have stabilized the business and positioned us well to navigate through economic- and industry-specific cycles over the long term."

Originally launched as a website focusing on selling clearance sale electronics and home goods merchandise, Overstock (NASDAQ: OSTK) is a leading online retailer of home goods, primarily furniture.

Consumers ever rising demand for convenience, selection, and speed are secular engines underpinning ecommerce adoption. For years prior to Covid, ecommerce penetration as a percentage of overall retail would grow 1-2% annually, but in 2020 adoption accelerated by 5%, reaching 25%, as increased emphasis on convenience drove consumers to structurally buy more online. The surge in buying caused many online retailers to rapidly grow their logistics infrastructures, preparing them for further growth in the years ahead as consumer shopping habits continue to shift online.

Sales Growth

Overstock's revenue growth over the last three years has been strong, averaging 24.5% annually. The initial impact of the pandemic was positive for Overstock's revenue, pulling forward sales, but quarterly revenue subsequently normalized, year over year.

Overstock Total Revenue

This quarter, Overstock reported a rather lacklustre 10.4% year on year revenue decline, missing analyst expectations.

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Usage Growth

As an online retailer, Overstock generates revenue growth by growing both the number of buyers, and the average order size.

Over the last two years the number of Overstock's active buyers, a key usage metric for the company, grew 31.5% annually to 8.1 million users. That has been one of the fastest growth rates of any consumer internet company, indicating that the pandemic had a strong positive effect on the business.

Overstock Annual Active Customers

Unfortunately, in Q4 the number of active buyers decreased by 1.1 million, a 11.9% drop year on year.

Key Takeaways from Overstock's Q4 Results

With a market capitalization of $1.56 billion Overstock is among smaller companies, but its more than $503.3 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We struggled to find many strong positives in these results. On the other hand, there was a decline in number of users and the revenue growth was quite weak. Overall, this quarter's results were not the best we've seen from Overstock. The company was up 12.3% in the pre-market hours and currently trades at $40.95 per share.

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The author has no position in any of the stocks mentioned.