Etsy posted fourth-quarter and 2022 earnings gains, while eBay reported an earnings slide for the quarter and the year. Lingering macroeconomic uncertainty led both companies to refrain from issuing full-year guidance for 2023.
Here’s a closer look at how each company performed in Q4 and overall in 2022.
Etsy grows through reengaging buyers
In Q4, Etsy reported consolidated gross merchandise sales of $4 billion, down 4% year over year. The company also owns Reverb, Depop and Elo7. Standing alone, the Etsy marketplace reported gross merchandise sales of $3.7 billion for the quarter, down 3.5% year over year.
Fourth quarter net income was $109.5 million, down 32% year over year. But the company says it took a $1 billion goodwill impairment charge for Depop and Elo7. It acquired fashion marketplace Depop in 2021 and Brazilian-based Elo7 in 2021.
Despite posting Q4 declines in several measures, Etsy ended the year with $2.56 billion in revenue, up more than 10% year over year. The company also reported $1.8 billion in gross profit and non-GAAP adjusted EBITDA of $716.9 million for 2022. Etsy CEO Josh Silverman said its marketplace ended the year on a high note with strong holiday performance. Silverman expressed pride in the company’s performance during a Wednesday earnings call.
“From a topline perspective, we’re now nearly three times the size we were pre-pandemic,” Silverman said, according to a call transcript. “And we’ve been careful about how we’ve grown our cost structure with an eye towards investing in the fewest most important areas we believe will sustain and continue to grow the business visible in our profitable growth and strong free cash flow during what was undoubtedly a challenging year for e-commerce at large, as well as for Etsy.”
New York City-based Etsy also issued its first quarter 2023 guidance this week. The company anticipates $2.95 to $3.15 billion in gross merchandise sales, revenue of $600 million to $640 million and an adjusted EBITA margin of 26-27%.
Etsy said it has nearly twice as many active buyers as it did in 2019, with about 89 million at year end. The company also said strategies to encourage more men to buy on the platform have worked. Etsy said it had 22 million active male buyers at the end of the year, up 124% since 2019. It addition, the company says it “reactivated” 24 million buyers who had lapsed over the last 12 months, which was the most in a year.
Etsy’s fourth quarter performance beat Wall Street’s expectations, leading analysts to offer a mixed short and medium-term outlook.
“Strong 4Q earnings were driven by effective marketing investment, search improvements, and strong new and existing customer engagement,” Curtis Nagle, a research analyst with Bank of America Securities, said in a note. Analysts with UBS, led by Kunal Madhukar, said in a note that Etsy’s “strength in new buyer adds and reactivations.” On the other hand, the marketplace is seeing a decline in the most engaged buyers on the platform. Those buyers represent a majority of gross merchandise sales. Analysts with Jane Hali & Associates shared a similar sentiment in emailed comments issued about a week before the earnings report, rating Etsy neutral for Q4 but positive long-term.
“Etsy continues to be an attractive platform for unique and personalized products for the consumer,” Hali analysts said. “For sellers, as consumers continue to feel pressure from inflation, many will be interested in other sources of income such as selling on Etsy.”
Ebay banking on international growth
San Jose, California-based eBay reported Q4 revenues of $2.5 billion, down 4% year over year. Gross merchandise volume in the period dropped 12% to $18.2 billion. The company reported generating $686 million of operating cash flow and $533 million of free cash flow from continuing operations during the fourth quarter.
The company posted full-year revenue of $9.8 billion, down 6% year over year. Ebay generated $2.6 billion of operating cash flow and $2.2 billion of free cash flow. Its net income from continuing operations for the year was $2.3 billion. The company also reported a net loss of $1.3 billion from continuing operations. Ebay’s Q1 2023 guidance projects $2.46 billion to $2.5 billion in revenue.
Jamie Iannone, eBay’s CEO said in an earnings announcement that the company “made significant progress on our multi-year strategic journey.” Part of the progress, he acknowledged, included the recent layoff of about 500 employees – about 4% of the company’s global workforce. The move will allow the company to create new roles in business areas with high potential, like new technologies and key markets, said Iannone, who noted that “there is no easy way to say goodbye to our talented colleagues.”
Ebay did share some positive news.
First, the company generated $4.6 billion in positive economic impact through the sale of used and refurbished items, which kept 73,000 metric tons of waste out of landfills. The company also said its launch last fall of international shipping will likely drive incremental gross merchandise volume, given that one-fifth of eBay’s gross merchandise value was through cross-border trade. But less than half of the inventory in eBay’s top three markets is available for export because of the enhanced requirements inherent in international retail transactions.
Ebay also acquired collectible tech platform TCGplayer in August. Jane Hali analysts said in a note this month that eBay, like Etsy, is likely to benefit from a big-picture economic environment where consumers are looking for lower prices and sellers are seeking more opportunities for income.
“We feel eBay is driving a great experience on the buyer and seller side. Ebay continues to work on creating an engaging and seamless experience for the consumer,” the analysts said. “We are noting improvements and find the platform to be less cluttered and easy to navigate. The presentation of the categories and products alludes to a more secure authentic buy than before.”