Technology missteps cause Overstock’s Q3 net loss to widen 370%

Mistakes in technology investments caused Overstock.com Inc.’s net loss to widen 373% year-over-year to $14.2 million for the third quarter ended Sept. 30, compared to a net loss of $3 million a year ago, as it slashed shipping charges to compensate for an inability to post new products, the company said today. The expanded net loss occurred despite a 64% year-over-year growth in Q3 revenue to $169.3 million and an 80% increase in gross profit to $234.8 million.

“I bit off more technology projects than my colleagues could chew,” CEO Patrick Byrne said in a letter to shareholders. Overstock, No. 19 in the Internet Retailer Top 400 Guide to Retail Web Sites, migrated too quickly in August to a new ERP system, forcing it to conduct manually several processes that should have been done automatically, and IT projects intended to improve profit margins by increasing efficiencies in logistics and customer service were delayed, Byrne said. “Rather than pass the problem to the customer in the form of bad service, we ate the cost by doing a great many things manually that should have been done automatically,” he said.

A critical shortcoming was Overstock’s inability to post new products to its site. “This gradually reduced the number of products on our site, especially best-sellers,” Byrne said. “This weakened sales, though we offset this for some time by running $1 shipping.”

For the nine months ended Sept. 30, Overstock’s revenue rose 78% to $458.8 million, up from $273.3 million in the same period a year ago; net loss widened to $20.9 million from $7.5 million.