(Bloomberg)—EBay Inc. rattled investors by trimming its annual revenue forecast, signaling that the online marketplace is losing momentum as the critical holiday season approaches.
Annual revenue will be $10.75 billion to $10.85 billion, eBay said Wednesday in a statement. The company in April projected $10.9 billion to $11.1 billion in sales for the year. Sales will be $2.64 billion to $2.69 billion in the third quarter, while analysts were projecting $2.73 billion. Quarterly earnings per share, excluding some costs, are forecast to be 54 cents to 56 cents, compared with analysts’ average estimate of 56 cents.
In the second quarter, eBay’s profit was 53 cents a share on revenue of $2.64 billion, according to a statement Wednesday. Total gross merchandise volume rose 10% year over year to $23.6 billion for the second quarter ended June 30. Active customer accounts grew 4% to 175 million. In addition, marketplace GMV was up 11% year over year to $22.6 billion, and StubHub GMV was up 5% year over year to $1.1 billion.
The reduced revenue projection, on top of lackluster sales for the second quarter, revived concerns that eBay is struggling to find its place in the shadow of online retail behemoth Amazon.com Inc., No. 1 in the Internet Retailer 2018 Top 500. It’s also facing greater competition from bricks-and-mortar stores like Walmart Inc. (No. 3), which are improving their own digital-shopping options.
“When you’re in e-commerce and growing at half the rate of the overall industry, that’s not going to cut it,” said Josh Olson, an analyst at Edward Jones & Co. “Investors don’t come to e-commerce for value. They come to e-commerce for growth.”
“The buyers on eBay are engaged, but they’re not bringing enough new customers to the platform,” said RJ Hottovy, an analyst at Morningstar Inc. “They’re doing some interesting things, but it’s tough to compete with Amazon.”
EBay shares have see-sawed this year, peaking at $46.19 in February after the company announced it would lower costs by using Adyen BV for payments processing rather than longtime partner PayPal Holdings Inc. It gave the gains back in April after issuing a disappointing second-quarter revenue forecast.
There are signs eBay is struggling. The company in June announced a reorganization that resulted in staff cuts of almost 300 employees. Software engineers and research scientists were among those let go in California, where eBay has its headquarters in San Jose. The company had 14,100 employees globally at the end of 2017. It could take investors time to adjust to a new strategy that sacrifices sales growth for profitability, Hottovy said.
CEO Devin Wenig tried to shore up support for his turnaround strategy, telling investors a recent round of job cuts targeted projects that were not paying off so the company could focus on things that show more promise. EBay will continue to invest in marketing to attract new customers and promoting new features like its guaranteed three-day delivery.
“While our brand campaign has been well-regarded externally, it’s not yet materially moved the needle on consideration, which is key to driving new buyer acquisition,” he said.
EBay has boosted advertising and changed the marketplace-shopping experience in an effort to lure new customers to the site. It tries to differentiate itself from Amazon, which charges yearly or monthly dues for shipping discounts, by emphasizing that EBay has no membership fees to access deals that often include free shipping. It ran a day of discounts on July 16 to compete with Amazon’s Prime Day promotion.
Amazon continues to gain market share, and now boasts 100 million global Prime subscribers. The world’s biggest online retailer will capture 49.1% of online spending in the U.S. this year, up from 43.5% in 2017, according to EMarketer Inc. EBay is a distant second in the U.S. with 6.6 percent of all spending.
EBay is No. 4 in the Internet Retailer 2018 Online Marketplaces.