7/18/13

Overstock.com reports a 22% sales increase in Q2 and a big profit jump

Overstock's revenue increased by 22% and profit shot up more than seven times over Q2 2012.

Don Davis , Editor in Chief

Consumers are spending more on Overstock.com, driving higher revenue and profits for Overstock.com Inc. But that doesn’t mean the web-only retailer has abandoned its roots in selling excess goods at highly discounted prices, says chairman and CEO Patrick Byrne.

“We’re an extreme discounter,” Byrne told analysts today. In fact, he said, on average prices on Overstock.com are 9% lower than on Amazon.com when the two e-commerce sites sell the same product.

Amazon.com Inc., No. 1 in the 2013 Top 500 Guide, did not immediately respond to a request for comment. Overstock is No. 31 in the Top 500.

Byrne made the comments today in response to an analyst who asked whether the steady increase in average order value on Overstock.com means the e-retailer is raising prices.

Overstock’s CEO agreed average ticket was up 21% in the second quarter, to $167 from $138 in the year-ago quarter. But, he said, it’s not because Overstock is raising prices. He says Overstock constantly compares its prices to 10 competitors, and plans to increase that to 60, checking prices on half a million products every day. “Our prices are the lowest,” he said. “We pretty much don’t want a product on the site that’s not the best price or tied for the best price.”

A shift to selling more products in the home and garden category—that’s more than 60% of sales, Byrne said—and higher-end jewelry, account for part of the higher average ticket, he said. In addition, he said, Overstock is spending more to attract more attractive customers. Overstock’s cost for acquiring a new customer increased 28% to $26.10 in the second quarter from $20.38 a year earlier.

“There are customers we do not want,” Byrne said. Asked to give an example, he cited a hypothetical jewelry store that buys 100 items and then returns 40 that haven’t sold.

Overstock plans to aggressively seek new customers in the current quarter, as consumers who buy for the first time in the third quarter often come back again during the holiday season, Byrne said. He also said Overstock has begun offering its products on online marketplaces operated by others, although he did not name them. Co-president David Nielsen told analysts that Overstock is buying up “major closeouts” so that it can offer big deals in the fourth quarter. “It’s going to be exciting,” he said.

Byrne also highlighted Overstock’s success in attracting consumers to shop on smartphones and tablets. He says mobile devices account for 35% of traffic to Overstock.com and 18-19% of sales. “We didn’t think people would shop on mobile, or we thought they would shop but not buy,” Byrne said. “That turns out not to be true.” But he said consumers who buy on smartphones have a lower average order value than Overstock.com customers as a whole, while tablet shoppers generate a higher ticket on average. He speculated that may be because tablets remain relatively expensive devices, mainly owned by more affluent consumers, and speculated the difference in spending behavior will change as tablet prices fall in the future.

For the second quarter, Overstock reported:

Shares in the web-only discount retailer rose 22% today after the company released its earnings report.

For the first two quarters of 2013, Overstock reported:

Topics:

Overstock.com, Overstock.com Q2 2013 sales, Top 500 U.S. retailers, web only retailers

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