by Despite decreases in revenues, company has gained 300,000 new customers in the past quarter following acquisition of Bed Bath & Beyond
MIDVALE, Utah — Overstock’s latest financial results for the third quarter ended Sept. 30 echo some of the decreases in sales heard in the industry at large. For the quarter, net revenues for the quarter compared to last year were down 18.9%, and year to date, they were down 22.8% for the same period in 2022. It’s a reality that is unfortunately affecting home furnishings sales because of a host of factors affecting the industry, namely slow housing sales and construction. It also results from an overall consumer malaise that has led to many tightening their wallets because of their spending in other areas including travel and entertainment, not to mention automobiles and dining out.
For those that missed the latest earnings report, here is a quick recap. Net revenues for the quarter were $373.3 million, compared to $460.3 million the same period last year. For the quarter, its net loss was just over $63 million, or $1.39 per share, compared to a net loss of $37 million, or 81 cents per share, the same period last year. Meanwhile, for the first nine months of the year, net revenues were $1.17 billion, compared to $1.5 billion last year. Its net loss during the first nine months was $146.8 million, or $3.25 per share, compared to a net loss of $19.7 million, or 46 cents per share, last year. The company’s cash and cash equivalents totaled $325 million by the end of the quarter, meaning it still has plenty of cash on hand not only to operate but also invest in different areas of the business.
In his prepared remarks commenting on the results, company CEO Jonathan Johnson said that over the last few months, “we have accelerated efforts to build a company with a bigger, brighter and bolder future.”
Taking a long-term view of how the purchase will reap benefits for the company and its shareholders, he went on to note that the company is in the early stages of capitalizing on the recent acquisition.
“Since launching the new Bed Bath & Beyond in the U.S. on Aug. 1, we have been successful in acquiring new customers and reactivating past customers,” he noted, a reference to the estimated 300,000 new customers the company gained during the quarter following the acquisition. “Total active customers grew sequentially after over two years. As I’ve said from the onset, growing the customer file is our primary measure of success.”
He added that orders have returned to positive year-over-year growth for the first time in over two years and that “this acquisition has positioned us for growth over the long term.”
Other highlights of the presentation indicate that it could take some time to regain momentum in the marketplace, although that could largely depend on some factors outside the company’s control, namely the slow housing market and its impact on furniture sales.
+ The company’s active customers totaled 4.9 million, down 15% year over year. In the previous second quarter, active customers totaled 4.6 million, meaning the company had a net gain of 300,000 customers following the acquisition of Bed Bath & Beyond. With the gain, it also nearly cut in half the year-over-year decrease in active customers compared to the second quarter of 2022.
+ Last Twelve Month net revenues per active customer were $322, down 13% year-over-year. This compares to LTM net revenues per active customer of $361 in the second quarter, which was down 1% from last year.
+ During Q3 it had a 3% increase in orders delivered that totaled 1.9 million, compared to 1.8 million during the second quarter, which was down 16% year over year.
+ The average order value was $192 during the quarter, down 21% year over year. In the second quarter, the average order value was $234, down 5% from last year.
+ During Q3, orders per active customer were 1.48, down 9% year over year, compared to 1.56 in Q2, a 5% drop.
+ Orders placed on a mobile device were 58% of gross merchandise sales compared to 51% in Q2.
The metrics provide insight into some of the weak spots and where the company has room to grow. Of particular interest are the increasing percentage of orders placed on a mobile device, which naturally highlights the importance of marketing to customers not only on those devices, but also on their laptops and desktops. With this type of interaction with the consumer, there is also an opportunity to encourage the idea of trading up, which could help increase the average order value and even frequency of customer purchases.
The online nature of the company’s business model obviously poses some challenges but also opportunities in terms of how and what to market to what we can assume is a growing customer base. How it grasps these opportunities in today’s economy will be worth watching in the months and years ahead as part of its future in the home furnishings segment.
