EBay forecast misses estimates as marketplace growth stalls

[SEATTLE] EBay Inc projected earnings that may miss analysts' estimates as growth on its marketplace stalled, revealing that shoppers went elsewhere during a holiday season that saw online spending reach new heights. Shares fell as much as 11 per cent in extended trading.

Profit, excluding certain items, will be 43 cents to 45 cents a share in the current quarter, EBay said Wednesday in a statement, compared with analysts' estimates of 48 cents. Sales in the fourth quarter were US$2.32 billion, unchanged from a year earlier, excluding PayPal Holdings Inc, which became a standalone company in July, EBay said.

EBay is struggling to remain relevant as Amazon.com Inc gobbles up market share by offering speedy delivery and brick- and-mortar retailers ramp up their online shopping options. The company also is working to improve traffic from Google Inc's search engine, a key entry point for many online shoppers.

"EBay has kind of lost its identity," said Steven Weinstein, an analyst at ITG Inc in San Francisco. "Their pricing isn't special. Their service isn't special. They've lost their competitiveness." U.S. e-commerce sales grew 13.6 per cent to reach US$106 billion last quarter, according to EMarketer. EBay's merchandise value - the total value of goods sold on the marketplace - of US$21.9 billion was unchanged in the quarter compared with 2 per cent growth a year earlier.

The San Jose, California-based company forecast annual earnings of $1.82 to $1.87 a share, essentially the same as 2015. Considering the company bought US$550 million of its stock, "they are guiding to declining profits this year," said Gil Luria, an analyst at Webush Securities Inc.

Chief Executive Officer Devin Wenig needs to entice shoppers and merchants back to EBay at a time when they have more alternatives for buying and selling goods online and consumers expect fast, free delivery offered by Amazon. A goal of EBay's split in July from payments business PayPal was to make sure each company could focus on its primary businesses.

Since the split, EBay shares gained 1.6 per cent to US$26.42 through the close Wednesday in New York.

The company has been trying to change how it displays its abundant inventory from millions of sellers to remain relevant on search engines for prospective shoppers. EBay last year altered the way merchants list items so search engines reward the company for its total web traffic.

EBay, which attracted 162 million active buyers in the fourth quarter, has been taking steps to attract new customers. The company experimented with free listings of hot-selling holiday gifts this year, including some Star Wars toys, waiving the fees normally associated with selling an item in hopes of adding must-have inventory to the site.

The company reported its StubHub ticket exchange generated US$232 million in the fourth quarter, a 33 per cent increase from a year earlier.

BLOOMBERG