Etsy Inc. shares jumped roughly 10% in after-hours trading Wednesday, after the e-commerce company reported that its revenue increased despite a decline in sales on its platform following a fee increase earlier this year.
Etsy
ETSY,
-4.25%
reported a third-quarter loss of $961 million, or $7.62 a share, due to a $1 billion impairment charge stemming from a write-down of the value of two acquisitions, Depop and Elo7; without that charge, Etsy said earnings would have been 58 cents a share, compared with 62 cents a share a year ago. Revenue increased to $594 million from $532 million a year ago, even as gross merchandise sales on the marketplace declined to $3 billion from $3.1 billion last year, and executives specially noted the revenue growth “includes the Etsy marketplace transaction fee increase which went into effect on April 11, 2022.”
Analysts on average were expecting earnings of 37 cents a share on sales of $565 million, according to FactSet. Etsy shares rose by double-digit percentages at times in after-hours trading following the release of the results, after closing with a 4.3% decline at $87.54.
Etsy sellers revolted against executives’ plans to increase the fees the company receives from purchases on the platform to 6.5% from 5% last spring. Executives have stuck by the increase, however, and showed why with their fourth-quarter forecast, which suggests Etsy will again increase revenue while sales on the platform decline.
“Increased revenue generated from our higher transaction fee is being reinvested in product and marketing initiatives, keeping Etsy handmade and safe, improving customer support, and our new Etsy Purchase Protection program, aimed at building customer loyalty,” Chief Financial Officer Rachel Glaser said in a letter to shareholders Wednesday.
For the holiday season, executives guided for revenue of $700 million to $780 million on gross merchandise sales of $3.6 billion to $4 billion; in the fourth quarter last year, Etsy reported revenue of $717 million on gross merchandise sales of $4.2 billion. Analysts on average were expecting fourth-quarter revenue of $741 million on gross sales of $3.9 billion, according to FactSet.
Etsy shares have declined 60% so far this year, amid doubts about e-commerce’s ability to live up to a boom in online sales earlier in the COVID-19 pandemic. In comparison, the S&P 500 index
SPX,
-2.50%
has declined 19.1%.
