Please ensure Javascript is enabled for purposes of website accessibility

Etsy Earnings Miss Q1 Estimates, Face Masks Drive Q2 Top-Line Growth

By Jennifer Saibil - May 7, 2020 at 10:39AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The e-commerce platform saw high growth through the pandemic, but earnings suffered.

Etsy (ETSY 7.38%), the online marketplace for everything made from home-creators, had high top-line growth in the first quarter of 2020, with a 34.7% increase in revenue. Gross merchandise sales (GSM) increased 32.6% year over year. Earnings, however, were not in line with expectations, coming in at $0.10.

Mixed results

Gross profits increased 24.8% year over year, but gross margin was down 500 basis points to 63.9%. Operating expenses increased 41.4%, mostly due to employee-related expenses. Net income decreased 60.3% year over year to $12.5 million, with a loss of $9.3 million, or $0.08 per share, due to foreign exchange.

Person sewing a face mask.

Image source: Getty images.

"The COVID-19 pandemic has been a test of our team, our marketplaces, our brand, and the underlying strength of our business," said CEO Josh Silverman. 

Looking forward

After what Silverman called a "volatile March," demand increased in April, specifically for face masks that comply with government guidelines. Etsy sold 12 million masks in April, which accounted for 17% of GMS. The Etsy marketplace saw 100% growth in April, fueled by mask sales but expanding into the full marketplace, and Silverman praised the company's ability to make adjustments in operations to meet that demand. "While there was no playbook for this situation, we moved with agility, focus, and purpose to support the Etsy global community and live up to our mission," Silverman said.

The company is expecting an increase between 80% and 100% in GMS in the second quarter, and a 70% to 90% increase in revenue.

Etsy stock is up 77% year to date.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Etsy. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Etsy, Inc. Stock Quote
Etsy, Inc.
ETSY
$116.90 (7.38%) $8.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
373%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.