What happened
Shares of Etsy (ETSY 7.42%) sank on Thursday after the online marketplace for craft goods warned shareholders that its pace of expansion was slowing. As of 2:22 p.m. ET, Etsy's stock price was down more than 18%.
NYSE: ETSY
Key Data Points
So what
The total dollar value of transactions processed on the company's e-commerce platforms, a key metric known as gross merchandise sales (GMS), rose 3.5% year over year to $3.3 billion in the first quarter. However, GMS declined by 2%, to $2.8 billion, on Etsy's namesake marketplace.
The company said consumers are shopping more in traditional retail stores now that the economy has reopened. They are also spending less on discretionary items, due in part to negative macroeconomic factors. Conflict in Europe and a corresponding surge in energy prices, as well as stubbornly high inflation in areas like food and housing costs, are widely expected to force many consumers to rein in their spending.
Image source: Getty Images.
It should be noted that Etsy experienced incredible growth during the early stages of the pandemic. So, despite the small decline in the first quarter, Etsy marketplace GMS was still up an impressive 177% compared with the first quarter of 2019.
Moreover, merchants continued to flock to Etsy's platform. Despite a 30% increase in fees that resulted in protests among a small group of sellers, total active sellers surged 62.8% to nearly 7.7 million. Growth in buying customers, though, was more muted. Active buyers increased 4.9% to 95.1 million.
All told, Etsy's revenue grew by 5.2% to $579.3 million. Its net income, however, fell 40.1% to $86.1 million, or $0.60 per share, largely due to acquisition-related expenses.
Now what
Investors appeared to be more concerned about Etsy's tepid guidance. Management expects GMS of $2.9 billion to $3.2 billion and revenue of $540 million to $590 million in the second quarter. The midpoint of those ranges would represent declines of roughly 6% and 2%, respectively, compared with the first quarter.
Still, Chief Financial Officer Rachel Glaser believes Etsy's future remains bright. "In the current macroeconomic environment, consumers have less disposable income and many more places to spend it, and while this creates a short-term headwind for sales on our marketplaces, we have very strong conviction in the long-term growth potential of our business," Glaser said.
