Overstock Weighs New Strategies After Q4 Loss

After reporting a net loss in the fourth quarter, Overstock said it will ramp up its online growth strategy to compete with rivals such as Wayfair.

Overstock reported a fourth quarter net loss of $95.7 million, or $3.72 per diluted share, versus net income of $3.1 million, or 12 cents per diluted share, in the year-earlier period.

Total net revenue for the quarter was $456.3 million versus $526.2 million in the year-prior period. Direct revenue was $18.5 million and partner and other revenue was $437.8 million versus $25.7 million and $500.5 million, respectively, in the year-previous period. Operating loss was $22.7 million as compared to an operating loss of $342,000 in the previous fourth quarter.

For the full fiscal year, the company’s net loss was $109.9 million, or $4.28 per diluted share, versus net income of $12.5 million, or 49 cents per diluted share, in the year earlier.

Total net revenue was $1.74 billion versus $1.8 billion in the prior fiscal year. Direct revenue was $83.1 million and partner revenue was $1.66 billion versus $101.6 million and $1.7 billion, respectively, in the fiscal year previous. Operating loss was $46.6 million as compared to operating income of $6.9 million in the previous fiscal year.

In a letter to shareholders, Patrick Byrne, Overstock CEO, stated that the previously announced e-commerce business sale evaluation was ongoing with the company advisor, but he did not comment on any conclusions drawn from the process. He did, however, declare that Overstock would become more proactively competitive with its e-commerce rivals, particularly Wayfair.

“We announced on our last earnings call that we had engaged Guggenheim to consider strategic alternatives, one of them being a sale of our e-commerce assets,” Byrne said. “This work is ongoing, and we will provide an update when appropriate. That said, our philosophy has always been to run every asset like we intend to own it forever, and our strategy discussion will be framed in that mindset. Our e-commerce business had its second annual pre-tax loss, $25 million, in nine years faced with a competitor called Wayfair running a pre-tax loss of $244 million for 2017. In fact, in the last four years, while our retail business has had pre-tax income of $30 million, Wayfair has lost $663 million. This is creating no small amount of margin compression. I believe it is time for us to respond in kind. I am announcing that we are for the first time adopting the classic Internet ‘growth strategy’ I have previously eschewed: high growth, negative GAAP net income, funded out of our negative cash conversion cycle. We have already turned on the jets, and will demonstrate this year that our growth engine is far more efficient.”