• Clint Engel

Overstock.com swings to a loss

SALT LAKE CITY — Bigger tickets helped Overstock.com to a 4.5% increase in first quarter revenues, but a charge connected to its investment in blockchain technology swung the e-commerce company to a loss for the period.

The home furnishings e-commerce giant also said it is considering “other alternatives” now for its Medici blockchain and financial technology business, “including a divestiture or raising capital.”

While revenues for the quarter ended March 31 increased to $432.4 million from $413.7 million for the same period a year ago, the company posted a net loss of $5.9 million, or 23 cents per share, compared with net income of $13.4 million, or 53 cents per share in the first quarter last year.

The most recent quarter included a $4.5 million impairment charge related to Overstock’s Medici-related investment in company called Peemova. The 2016 first quarter results, meanwhile, included $19.5 million received from a litigation settlement.

Overstock’s core retail business had pre-tax income of $1.4 million. Gross profit increased 12% to $86.9 million, and Overstock’s gross margin increased to 20.1% from 18.7% in the 2016 first quarter.

The revenue growth was due primarily to a 10% increase in average order size, offset in part by increased promotional activity, the company said. The gross margin improvement was due partly to a continued shift in sales mix to higher-margin home and garden goods, it said.

In a release, Overstock Founder and CEO Patrick Byrne noted the pre-tax gain for the retail business, which “remains fundamentally sound.”

Medici, he said, cost the company $8 million in the quarter, including the $4.5 million impairment charge. “However, I remain confident that we are doing the right thing for our shareholders by having Medici pursue a position of global leadership in blockchain technology.”

Later in the release, Overstock warned that losses, additional expenses, acquisitions and investments tied to its Medici initiatives, “coupled with the seasonality of our business, may lead to reduced consolidated income or losses in some periods and to reduced liquidity.

“Additionally, we may recognize additional impairment charges from our investments,” Overstock said. “We are also considering other alternatives for Medici, including divestiture or raising capital.”

Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
Quarter ended 3/31 2017 2016 % change
Net revenue $432,435,000 $413,677,000 4.5%
Operating income ($2,313,000) $17,813,000 (113.0%)
Net income ($6,282,000) $13,094,000 (148.0%)
Earnings per share ($0.23) $0.53 (143.4%)
Clint EngelClint Engel | Senior Retail Editor, Furniture Today

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