The e-commerce platform specializing in unique and handcrafted items, Etsy (ETSY -0.74%), unveiled its first quarter earnings on May 1, 2024.
Tallying at $0.48 per diluted share, Etsy met the mark set by analysts. However, the revenue of $646.0 million was a hairbreadth below expectations of $646.3 million. Despite this slight revenue shortfall, the overall tone of the quarter suggests resilience, with a subtle revenue growth of 0.8% and a 15% increase in active sellers compared to the previous year's quarter.
| Metric | Q1 2024 | Estimates | Q1 2023 | % Change Y/Y |
|---|---|---|---|---|
| GMS (billions) | $2.99 | N/A | $3.10 | (3.7%) |
| Revenue | $646.0 | $646.3 | $640.9 | 0.8% |
| Earnings per share | $0.48 | $0.48 | $0.53 | (9.4%) |
| Net Income (millions) | $63.0 | N/A | $74.5 | (15.5%) |
| Active Buyers (millions) | 96.4 | N/A | 95.5 | 0.9% |
| Active Sellers (millions) | 9.1 | N/A | 7.9 | 15% |
Data sources: Company results from the company. Analyst estimates from FactSet. GMS = Gross Merchandise Sales.
Understanding Etsy's business
Etsy stands out in the e-commerce world by focusing on a curated marketplace for handmade, vintage, and unique items, including some hard-to-find factory-manufactured goods. This distinct niche appeals to both sellers and buyers who value creativity and personalization.
Recently, the company has honed in on enhancing its platform's user experience and expanding its payment and advertising services to bolster revenue in light of fluctuating gross merchandise sales (GMS) trends. This metric measures the total value of goods sold through the Etsy marketplace, which is different from the smaller slice that forms Etsy's main revenue streams.
Central to its strategy, Etsy has introduced new features such as Gift Mode and improved search functionalities, while also implementing a new seller fee to discourage automated setups of potentially fraudulent Etsy stores. These adjustments aim to deepen trust within its marketplace ecosystem. Despite a downturn in GMS, a slight uptick in revenue suggests that these diversified revenue streams are starting to pay off.
Quarter in review
The past quarter witnessed a modest 0.8% growth in Etsy's revenue, owing largely to strategic enhancements in its services revenue, which saw a 3.2% climb. Meanwhile, marketplace revenue experienced a slight dip of 0.1%. In the background of these financial shifts, Etsy has proactively managed its expenses, leading to a 6.4% increase in operating expenses amid lower product development budgets and higher marketing costs.
Yet, increased active sellers highlight Etsy's continued allure as a marketplace, growing by a substantial 15%. Despite challenges, the introduction of innovative features and the commitment to enhancing marketplace integrity reflect Etsy's push to improve seller and buyer engagement. This is critical as it eyes recovery and growth in an uncertain economic landscape.
Looking ahead
For the upcoming quarter, Etsy anticipates GMS trends to mirror those of Q1, with potential variations ranging from a mid-single-digit decline to a low single-digit decline. Revenue increases are expected to outpace GMS growth, indicating an enhanced take rate and sustained margins. This underscores an optimistic yet cautious outlook as Etsy navigates through 2024.
Investors should keep an eye on how Etsy's strategic initiatives around its marketplace, global reach, mobile optimization, and seller and buyer tools evolve in response to shifting market dynamics. The platform's ability to attract more users while enhancing the user experience will be pivotal in its journey ahead.
