Overstock Reports Q1 Loss, Sees Bleak Q2, Auction GMV Rises 43% to $8 million

[mandy]

Overstock reports Q1 revenues of $180 million, a loss of $15.9 million, and forecasts a bleak second quarter. 

Auction GMV grew 43% from $5.6 million in Q1 2005 to $8 million in Q1 2006

We lost $15.9 million in Q1. I anticipate Q2 will look about the same, before we start climbing out of this hole in the second half of 2006. Our theme for this year is to slow growth during the first half of the year so we can work on improving internal business processes in preparation for stronger performance in Q4 and beyond. We continue to anticipate things will look better in Q3, and to be out of the ditch by Q4. Nothing that has happened recently suggests to me that we should change course.

Sales and operating expenses in Q1 were just what I expected, though margins were a bit lower than I anticipated. The lower margins are a function of a couple of things. Part of it stemmed from warehouse costs that were simply carryover from the systems problems that plagued us in the last part of 2005. We are currently working on an improved build-out of our Salt Lake City fulfillment warehouse, and I am hopeful that when we finish this in June, we will see a drop in our variable handling costs immediately. Additionally, a small amount comes from customer service costs, which again, were inflated due to our systemic problems in 2005, but also because we are emphasizing quality over cost: when our new customer service application goes live in June, I expect a significant drop in these costs.

Again, I believe that Q2 will look like this past quarter. It is going to take until Q3 to start seeing the benefits of the various technologies and platforms we have spent the last year building. I believe that our expense management (how much it costs to handle a package, a customer service call, etc.) will be much better starting in June and July. Other corporate expense management looks good. But gross margins will likely remain where they are in Q2 for other reasons. As a result of improvements in our inventory management systems, I believe we are carrying more inventory than we really need, and we plan to bring it down another $15-20 million over the next few months.

We ended Q1 with $52 million in cash and marketable securities, including $20 million of borrowings on our inventory lines. We have an additional $30 million of availability on our lines, and are continuing to reduce inventory to turn it back into cash.

In summary, I'm committed to stay the course: slowing growth while we improve our systems and enhance the service we provide to our customers. Unfortunately, Q2 will be another disappointing quarter at the bottom line; then the tide should start coming back in by Q3 and we should be afloat in Q4.

Your humble servant,

    Patrick

Total revenue -- For the quarter ended March 31, 2006, Overstock.com reported total revenue of $180.2 million, a 9% increase from the $165.9 million reported in 2005.

Gross profit and gross margins -- For the quarter ended March 31, 2006, Overstock.com reported gross profit of $25.2 million (14.0% margins), a 2% increase from the $24.8 million (14.9% margins) reported in 2005.

Net income (loss) -- For the quarter ended March 31, 2006, Overstock.com reported net loss of $15.9 million, or $0.82 loss per share, compared to $4.3 million, or $0.22 loss per share, reported last year.

Overstock.com had cash and marketable securities of $51.8 million and working capital of $66.8 million on March 31, 2006.

Gross bookings (excluding auctions and travel) -- For the quarter ended March 31, 2006, Overstock.com reported gross bookings of $200.9 million, an 8% increase from the $184.2 million reported last year.

Auction gross merchandise volume
     (in 000s)                                 [2005] $5,602         [2006] $8,079

full earnings press release: http://www.shareholder.com/overstock/Rel...eID=194491

[amy]

Overstock.com, Inc. (Nasdaq: OSTK) today announced the issuance of 1,041,667 shares of its common stock for $25 million at a price of $24 per share. The issuance was made under the Company's existing shelf registration statement.

The Company anticipates using the net proceeds of the offering primarily for general corporate purposes and working capital requirements, including sales and marketing activities and inventory purchases.

http://www.shareholder.com/overstock/Rel...eID=194925

[xppman]

It's ALL about the "O".
They tried.. But they are too focused on the "O"
and seem to be following ebay's model.

Sorry I'll pass on investing with the "O". 

The WEBSITE on the other hand, seems to be the
BIG thing going.

Kind of like the Blog...

[amy]

and seem to be following ebay's model.

I think they're trying to follow uBid's verified businesses-only auction model and will eventually make the site business-to-consumer only by requiring that all sellers are Trusted Merchants like uBid too.  I think being the next uBid rather than the next eBay  was the goal all along and they only allowed person-to-person sales as a way to build recognition for their auctions.