Sluggish Consumer Spending Hurts ETSY's Q1 Marketplace Revenues

Etsy ETSY reported first-quarter 2024 results, wherein earnings and revenues missed estimates. The company reported earnings of 48 cents per share, which declined 9.4% year over year. Revenues were $645.95 million, which increased 0.8% from the year-ago quarter. Strong momentum across active sellers and reactivated buyers were positive.

However, softness in ETSY’s marketplace was a major concern. (Read more: ETSY's Q1 Earnings Miss Estimates, Revenues Increase Y/Y)

First-quarter marketplace revenues were $466.98 million (72.3% of the total revenues), down 0.1% from the year-ago quarter. The slowdown in consumer discretionary spending due to macroeconomic headwinds remained the primary reason for sluggish top-line growth. Etsy marketplace gross merchandise sales (GMS) were $2.6 billion, down 5.3% year over year and 5.6% on a currency-neutral basis.

Shares of Etsy have lost 23.8% on a year-to-date basis against the industry’s growth of 16.6%.

The company’s core marketplace, namely, connects various creative artisans and entrepreneurs with consumers. It allows various merchants to list and sell products belonging to categories like homewares and home furnishings, jewelry and personal accessories, apparel, craft supplies, paper and party supplies, and beauty and personal care via its marketplace platform. In addition to the core marketplace, the company’s ‘House of Brands,’ which comprises Reverb and Depop marketplaces, is part of its overall marketplace business.

Growing momentum among active buyers and sellers remains a major positive for Etsy’s marketplace business. Growing investments to provide sellers with new tools and insights, such as a ‘Growth Page’ with customer insights to help them grow their businesses and a new ‘earnings calculator’ to assist them in understanding various inputs that go into their profitability, have been driving Etsy’s seller momentum.

Apart from this, increasing traction with Gift Mode has been driving growth in the company’s site-wide gifting GMS.

However, challenging macro scenario and high inflation continue to be headwinds for the company.

Zacks Rank & Stocks to Consider

Currently, Etsy carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Arista Networks ANET, Applied Material AMAT and Dell Technologies DELL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arista Networks’ shares have gained 11.6% year to date. ANET is set to report its first-quarter 2024 results on May 7.

Applied Material’s shares have gained 22.4% year to date. AMAT is set to report second-quarter fiscal 2024 results on May 16.

Dell Technologies’ shares have surged 62.1% year to date. DELL is set to report its first-quarter fiscal 2025 results on May 30.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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