What happened
Overstock.com (BYON -0.96%) shareholders were beating the market this week as the stock gained 13% through the close of trading Thursday. That compares to a roughly flat result for the S&P 500, according to data provided by S&P Global Market Intelligence. The e-commerce retailer's stock has now returned to positive territory for 2023, but still trails the wider market's 8% year-to-date increase.
The rally in the stock was sparked by the company's improving operating trends even as consumer demand in its core home furnishings segment shrinks.
So what
On Thursday, Overstock announced its first-quarter results. Sales fell by 29%, and the company posted a slight net loss as demand continued to contract following soaring sales during the pandemic. Overstock and its peers now face a glut of excess inventory related to that previous demand spike and the subsequent pullback, which started in late 2022.
Yet the company beat Wall Street's expectations on sales and earnings. Other encouraging signs in the Q1 report included stabilizing demand in some key niches, strong average order value, and rising gross profitability. "We continued to navigate a highly competitive landscape to deliver healthy gross margins," CEO Jonathan Johnson said in the earnings press release.
Now what
Investors were especially pleased to hear management describe gathering momentum in the business as the spring season approached. Sales trends improved during each successive month of the quarter, executives said, with the highest spike occurring just as the period closed. This suggests that Overstock could be entering a period of stabilization that will last into late 2023 following its painful pullback over the last several quarters.
That improvement doesn't make the stock a screaming buy. There are other e-commerce retailers with more diverse revenue streams that are operating profitably right now, after all. But this week's news did inject some optimism into Overstock's growth story.
