On Wednesday, Etsy Inc. forecasted less revenue for the second quarter, suggesting the e-commerce industry cools off after a pandemic-fueled boost.
After two years of outsized growth, the company geared up for a slowdown as the economy reopens.
In addition, consumers gradually return to shopping in physical stores.
In the first quarter, the firm’s revenue came in at $579.00 million, above the average market estimate of $575.00 million. Then, its earnings per share was $0.60, matching the analysts’ expectations.
However, Etsy posted only a 5.20% increase in sales from a year ago. This result marked the first time revenue grew in the single digits.
Correspondingly, the business expects second-quarter revenue to come in between $540.00 million and $590.00 million. This projection is significantly below the estimated $628.00 million.
Moreover, it anticipated gross merchandise sales during the quarter to be in the range of $2.90 billion and $3.20 billion. Then, the figure is still below the analysts’ GMS of $3.40 billion.
Accordingly, Etsy chief executive officer Josh Silverman blamed the guidance on tough pandemic era comparisons. He further stated the current outlook implies a decline between low to high single digits for the marketplace.
Regardless, he remained optimistic about the company’s potential for sustained growth over the long term. He also reassured investors that the firm would retain over 90.00% of the gains over the past two years.
Etsy chief financial officer Rachel Glaser explained that the firm began to witness a deceleration in GMS in February. Then, the downturn eventually worsened throughout the quarter.
Consequently, she pointed to rising inflation, the economic reopening, and the Ukraine war as catalysts behind the slowdown.
Etsy reflects Amazon’s weakness
Etsy’s earnings reports came after Amazon.com, the e-commerce leader, largely disappointed market participants last week. The retailer titan said it had excess capacity and higher expenditures related to inflation.
Remarkably, the tech giant triggered the rout with a weaker-than-expected revenue forecast, emphasizing the slowing growth in the sector.
In recent months, the industry has struggled with a jump in costs amid the tight labor market. In addition, companies also took a hit from the ongoing supply chain crisis.
Meanwhile, Etsy downplayed the impact of a seller strike last month, when thouEtsysands of merchants protested the recent fee hike. The company said that only 1.00% of sellers temporarily shuttered their shops. It did not also see a material impact to churn rates on the platform.
Nevertheless, shares of the firm slumped 10.83% or 11.84 points to $97.49 on Wednesday’s extended trading.