Etsy's revenue guidance misses estimates as online growth slows

·4-min read

Etsy (ETSY) reported second-quarter results after market close on Wednesday that topped consensus estimates. However, the company's forecast for current-quarter sales missed Wall Street's expectations, signaling a bigger-than-expected slowdown in e-commerce growth. Shares plunged by 12% in late trading.  

Here were the main results from Etsy's report, compared to consensus data compiled by Bloomberg:

  • Revenue: $528.9 million vs. $525.8 million expected and $428.7 million Y/Y 

  • Earnings per share: 68 cents vs. 64 cents expected and 75 cents Y/Y 

Heading into Etsy's report, investors were bracing for a deceleration in the e-commerce company's business as more shopping resumed in person. Shares of Etsy already slid nearly 8% last Friday alone on the heels of a sharply disappointing quarterly report from online shopping behemoth Amazon (AMZN). The Seattle-based company's miss on second-quarter sales and weak forecast for the current quarter appeared to signal that some of the biggest beneficiaries of last year's stay-at-home behavior were losing steam faster than anticipated, with consumers quickly turning their attention back to in-person experiences as vaccinations took place this spring.

Likewise, Etsy also signaled its expectation for a slowdown, as pandemic-era online shopping and a boost from government stimulus checks earlier this year began to wane. Etsy said it expects third-quarter revenue to come in between $500 million and $525 million, missing Wall Street's expectation for $527.5 million in sales for the quarter. 

The company also declined to provide full-year guidance, citing the "continued uncertainty of future macroeconomic conditions as a result of the ongoing COVID-19 pandemic."  

Still, however, many analysts suggested strength in e-commerce is set to continue, albeit with some moderation in the rate of growth, given that the pandemic accelerated consumers' shift to online shopping. Etsy's top-line growth compared to 2019 demonstrates this trend: At nearly $529 million, Etsy's second-quarter revenue was up just 23.4% over last year, but by more than 190% versus the comparable period in 2019 before the pandemic.  

"Etsy's second quarter 2021 performance is quite remarkable when viewed in context of how dramatically the world changed during the year-ago period," Etsy CEO Josh Silverman, said in a press statement. "It is deeply gratifying to me and our entire team that we are able to report strong year-over-year growth, with GMS [gross merchandise sales] and revenue up approximately 13% and 23% respectively. In fact, excluding face masks, which were an important driver of the prior year period, second quarter GMS for the Etsy marketplace increased 31%." 

BRAZIL - 2021/07/12: In this photo illustration the Etsy logo seen displayed on a smartphone. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)
BRAZIL - 2021/07/12: In this photo illustration the Etsy logo seen displayed on a smartphone. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

Etsy will be lapping exceptionally strong growth rates last year for the rest of 2021, with sales up at least 128% year-on-year in each of the second, third and fourth quarters of 2020. 

However, the company has also brought on a considerable number of new buyers and sellers to the platform over the past year, with retention of these new users seen as critical to the company's longer-term growth potential. Active buyers grew 50% over last year to 90.49 million, but declined sequentially from the first quarter's 90.7 million. Active sellers, however, increased over both last year and last quarter to 5.2 million. 

Etsy also has made a number of recent acquisitions to try and broaden its reach among both domestic and international consumers. The company completed its acquisition of fashion marketplace Depop in July, and it announced it was acquiring Brazilian online marketplace Elo7 in June.

Etsy shares have risen just 13.5% so far for the year-to-date, underperforming against the S&P 500's 17.4% rise and giving back some gains after rocketing higher by 301% in 2020.

This post is breaking. Check back for updates.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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