What happened
Shares of Etsy (ETSY 0.49%) fell by 19.8% in May, according to data provided by S&P Global Market Intelligence.
The slide extends the decline of the e-commerce player's shares to 28.6% year to date.
Image source: Getty images.
So what
Etsy released its fiscal 2023 first-quarter earnings last month, and the numbers showed a continuation of the decline in e-commerce volumes that have plagued the industry. Gross merchandise sales (GMS) fell by 4.6% year over year to $3.1 billion after dipping by 1.3% year over year for the whole of 2022.
Revenue jumped by 10.6% year over year to $640.9 million, mainly because of a fee increase that Etsy implemented back in February of last year that raised seller transaction fees from 5% to 6.5%. Investors, however, were probably disappointed that net income has kept declining, falling by 13.4% year over year to $74.5 million.
There were bright spots in Etsy's earnings report, though. Active buyers and sellers continued to climb despite the dour outlook for the e-commerce segment, rising by 0.4% and 3.8% year over year, respectively. The company also provided healthy guidance for its second quarter, with GMS estimated at between $2.85 billion and $3.1 billion, and revenue projected in the range of $590 million to $640 million. Taking the midpoint of each attribute, this represents a 1.8% year-over-year dip in GMS but a 5.1% year-over-year rise in revenue.
Now what
Etsy continues to focus on what it does best -- being a trusted e-commerce platform that boasts a collection of unique, handcrafted items that cannot be found elsewhere. The company has invested money and effort to improve its search and discovery to increase personalization and drive up the average order value. It also provides sellers with growth insights to help drive higher sales and introduced a Star Seller filter that spotlights this category of sellers to increase purchase frequency and value.
In line with its focus on personalized collections, Etsy has recently partnered with musician and entrepreneur John Legend to launch a limited-edition collection of items that includes storage cabinets, ceramics, planters, baskets, and other accessories. Such a move could certainly help to enhance the appeal of Etsy's platform and increase buyer loyalty.
During the quarter, Etsy also reported a sharp 21% year-over-year jump in reactivated buyers even though new buyer numbers fell by 6.7% year over year. This trend led to the year-over-year growth of active buyers for the first time since the fourth quarter of 2021, a trend that may continue.
