Overstock (NASDAQ:OSTK) Reports Sales Below Analyst Estimates In Q3 Earnings

Radek Strnad /
2022/10/27 6:09 am EDT

Online home goods retailer Overstock (NASDAQ: OSTK) fell short of analyst expectations in Q3 FY2022 quarter, with revenue down 33.2% year on year to $460.2 million. Overstock made a GAAP loss of $36.9 million, down on its profit of $30.4 million, in the same quarter last year.

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Overstock (OSTK) Q3 FY2022 Highlights:

  • Revenue: $460.2 million vs analyst estimates of $472.8 million (2.66% miss)
  • EPS (non-GAAP): $0.13 vs analyst estimates of $0.05 ($0.08 beat)
  • Free cash flow was negative $7.54 million, compared to negative free cash flow of $14.5 million in previous quarter
  • Gross Margin (GAAP): 23.3%, up from 22.7% same quarter last year
  • Annual Active Customers: 5.8 million, down 2.9 million year on year

"Despite a challenging retail environment, our business continues to be profitable for the tenth consecutive quarter, and we ended the quarter with a strong balance sheet and cash position," said Overstock CEO Jonathan Johnson.

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 22.2% annually. Unfortunately, the pandemic had a negative impact on Overstock's revenue growth.

Overstock Total Revenue

This quarter, Overstock reported a rather lacklustre 33.2% year on year revenue decline, missing analyst expectations.

Before the earnings results were announced, Wall St analysts covering the company were estimating revenues to decline 5.92% over the next twelve months.

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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 13.5% annually to 5.8 million users. This is a solid growth for a consumer internet company.

Overstock Annual Active Customers

Unfortunately, in Q3 the number of active buyers decreased by 2.9 million, a 33.3% drop year on year.

Key Takeaways from Overstock's Q3 Results

With a market capitalization of $1.17 billion Overstock is among smaller companies, but its more than $427.5 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 is flat on the results and currently trades at $24.95 per share.

Overstock may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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