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How Etsy Transformed Into a Coronavirus Mask Factory in Q1

By Rich Smith - May 7, 2020 at 1:41PM

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Mask demand accelerated sales at Etsy just as soon as the quarter was over.

Etsy (ETSY -6.50%), the online marketplace for buying and selling handmade goods, had a pretty terrific Wednesday, with its stock closing the day up 7.5% after reporting strong sales growth even in the midst of a coronavirus pandemic

True, Etsy suffered a steep decline in profits in its first quarter, down 58% year-over-year at just $0.10 per diluted share. But between 23% sales growth in the company's flagship "marketplace" business, and 71% growth in "services," the company ended up with overall sales growing 35%, which was significantly better than the 30% growth Wall Street had predicted.

These were some pretty great numbers (profits aside) for Q1. What I'd like to highlight today, though, is what Etsy investors can look forward to in Q2.

Line of faces wearing cloth masks

Image source: Getty Images.

The year 2020, says CEO Josh Silverman, gives Etsy a chance to demonstrate its ability to "pivot" its product offerings by bringing more sellers online (active sellers -- up 26%) to meet the demands of all the new buyers who flocked to Etsy this year (active buyers -- up 16%). And one of the hottest products being demanded by buyers, and produced by sellers, is coronavirus masks.

"Etsy experienced a dramatic shift in demand during the month of April as global buyers turned to Etsy for cloth face masks," says Silverman. Between demand for masks and for other products, Etsy enjoyed "over 100% growth for the Etsy marketplace in April."

That last word is key.

Recall: Etsy just reported 23% marketplace sales growth in the first quarter -- but Q1 ended on March 31. The next month, demand for homemade masks helped marketplace sales grow four times as fast. And if you think that bodes well for Q2 sales growth at Etsy, well ...

So do the folks who just bid up Etsy stock 7.5% in a day.

Rich Smith 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.

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