Etsy Misses Holiday-Quarter Sales Estimates, Shares Fall

Etsy, the popular online marketplace for handmade and vintage items, has missed its holiday-quarter sales estimates, leading to a decline in its share price. The company reported fourth-quarter sales of $807.2 million, falling short of analysts' expectations of $815.5 million. Gross merchandise sales (GMS) also came in lower than expected, at $4 billion compared to the estimated $4.1 billion. As a result, Etsy's shares fell by 5.9% over the past 12 months, while the S&P 500 Index fell over the same period.



Etsy's fourth-quarter net income was $109.5 million, or $0.77 per share, compared with $161.6 million, or $1.11 per share, in the same quarter in 2020. Revenue came in at $807.2 million, up from $717.1 million in the prior-year quarter. However, gross merchandise sales were $4 billion, down 4% year over year.



Analysts on Wall Street project that Etsy will announce quarterly earnings of $0.95 per share in its forthcoming report, representing an increase of 21.8% year over year. Revenues are projected to reach $862.01 million, increasing 2.3% from the same quarter last year. Over the last 30 days, there has been an upward revision of 1.3% in the consensus EPS estimate for the quarter, leading to its current level. This signifies the covering analysts' collective reconsideration of their initial forecasts over the course of this timeframe.



Etsy's missed holiday-quarter sales estimates can be attributed to several specific factors:

1. Consumer Discretionary Product Spending Pressure: The overall economic climate and consumer spending habits played a significant role in Etsy's sales performance. With consumers being more cautious about their spending, especially on discretionary items, Etsy's sales were negatively impacted.
2. Shortened Holiday Season: The timing of the holiday season in 2021 was less favorable for Etsy compared to previous years. This resulted in a shorter peak shopping period, which contributed to lower sales.
3. Category Mix and Promotional Environment: The mix of products sold on Etsy and the highly promotional and competitive retail environment also contributed to the missed sales estimates. Some categories may have performed better than others, leading to an overall decrease in sales.

Investors can evaluate the potential long-term impact of these factors by considering the following:

1. Economic Trends: Monitor consumer spending trends and the overall economic climate to assess the long-term impact of consumer discretionary product spending pressure on Etsy's sales.
2. Holiday Season Timing: Keep an eye on the holiday season's timing in future years to better anticipate the potential impact on Etsy's sales performance.
3. Product Category Performance: Analyze the performance of different product categories on Etsy to identify trends and adjust expectations accordingly.
4. Platform Stability and Reliability: Assess Etsy's efforts to address and prevent issues like the forced vacation mode incident, as platform stability and reliability are crucial for maintaining seller and buyer confidence.

By considering these aspects, investors can better understand the potential long-term impact of the factors contributing to Etsy's missed holiday-quarter sales estimates.