EBay Predicts Revenue Decline as Strategic Review Continues

By Maria Armental 

EBay Inc. is bracing for its first quarterly revenue decline in four years, as the online marketplace works through a strategic review that prompted a leadership shake-up and could reshape its overall business.

The December quarter's forecast -- typically bolstered by the holiday shopping season -- came as the company on Wednesday said its third-quarter profit fell 57% from a year ago, driven by higher costs and sluggish sales of merchandise through its main platform.

EBay, which also owns ticketing business StubHub and has a classified-advertising business, has spent much of 2019 in an operations review after a clash with some investors over the company's strategic focus. On Wednesday, the California company said it expects to give an update on StubHub before the next earnings release and that it has a three-year plan to improve margins and invest in customer initiatives to drive growth.

Interim Chief Executive Scott Schenkel said the company was committed to changing its marketplace to make sure buyers and sellers are served "in an authentically eBay way."

As for the classified-ad business, Mr. Schenkel said during a conference call with analysts that the company is continuing to consider its long-term options. Asked about why the review of the classified business was taking longer and whether there were no interested parties, Mr. Schenkel said eBay has a record of divesting businesses when it makes sense to shareholders. He declined to comment further.

Shares, which closed Wednesday at $39.20, fell 6% in after-hours trading.

Mr. Schenkel, who had been eBay's finance chief, assumed the reins of the company in September after Devin Wenig resigned over conflicts with a reshaped board of directors.

EBay, facing pressure from Elliott Management Corp. and Starboard Value LP to get rid of StubHub and the classified-ad business, agreed to add new board members and started paying quarterly dividends.

EBay was founded in 1995 -- the same year that Amazon.com launched as an online bookstore -- and became a success story during the dot-com heyday but it has struggled to match Amazon.

On Wednesday, eBay said active buyers reached about 183 million in the September quarter, the seventh straight quarter of gains, though gross merchandise volume, or the amount of business transacted on its platforms, fell 4% from the comparable period a year earlier to $21.72 billion. Analysts expected about $22 billion in gross merchandise volume.

Overall, eBay's quarterly profit dropped to $310 million, or 37 cents a share. On an adjusted basis, profit rose to 67 cents a share from 56 cents a share a year earlier.

Net revenue was flat at $2.65 billion but would have increased 2% excluding the impact of currency fluctuations.

In the current quarter, eBay expects revenue to fall to a range of $2.77 billion to $2.82 billion, which would be the first year-over-year quarterly decline since eBay spun out payments company PayPal Holdings Inc. in 2015.

EBay on Wednesday tempered its full-year outlook for revenue and profit. The company expects to earn a profit between $1.97 and $2.02 a share on $10.75 billion to $10.80 billion in revenue, compared with the $1.97 to $2.07 a share in profit on $10.75 billion to $10.83 billion in revenue as it previously expected.

However, the company boosted its adjusted annual profit view to a range of $2.75 to $2.78 a share from $2.70 to $2.75 a share.

Write to Maria Armental at [e-mail]

(END) Dow Jones Newswires

October 23, 2019 19:19 ET (23:19 GMT)

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