An employee walks past a quilt displaying Etsy Inc. signage at the company’s headquarters in the Brooklyn.
Victor J. Blue/Bloomberg via Getty Images
Etsy missed on revenue and gross merchandise sales for the fourth quarter, with the company citing “significant headwinds,” including a pullback in consumer spending. The stock closed down 10% on Wednesday.
Here’s how the company did:
- Earnings: $1.03 per share adjusted vs. 93 cents per share expected by LSEG
- Revenue: $852.2 million vs. $862.8 million expected by LSEG
Gross merchandise sales, or the total volume of goods sold on the platform, came in at $3.74 billion, a decline of 6.8% year over year. Wall Street had forecast fourth-quarter GMS of $3.8 billion, according to analysts surveyed by FactSet.
The fourth quarter includes the holiday shopping period. Etsy said the GMS slump was a result of “pressure on consumer discretionary product spending,” tough comparisons due to the shortened holiday shopping season and “category mix,” as well as a competitive retail and marketing environment.
Etsy operates an online marketplace that connects buyers and sellers with mostly artisan and handcrafted goods. The company has been working to strengthen its image as a destination for unique gifts and products as it combats a fiercely competitive e-commerce market dominated by Amazon and, more recently, Chinese online retailers Temu, Shein and TikTok Shop.
Online holiday spending in November and December rose nearly 9% to $241.1 billion, topping analysts’ expectations of $240.8 billion, according to Adobe Analytics. Inflation-weary shoppers opened their wallets in search of deep discounts, but some discretionary categories like furniture, jewelry and accessories were expected to see some softness compared with toys and home decor products.
Revenue in the fourth quarter increased 1.2% to $852.2 million, compared to $842.3 million a year ago.
Net income for the fourth quarter came in at $129.9 million, or $1.17 per share, from $83.2 million, or 70 cents per share, a year ago.
Etsy also gave a downbeat outlook for the current quarter, saying it expects GMS will fall at a rate similar to the year-over-year performance it reported in the fourth quarter.
Etsy CEO Josh Silverman said on a call with investors that the company is taking a short-term hit to its GMS as it works to overhaul the site. The company has been focused less on “near-term conversion driving” in favor of improving the quality of goods and shopping experience on its site, Silverman said.
“While this resulted in real opportunity cost to GMS to the tune of at least a few hundred million dollars last year, we believe it will be well worth it as we’re now building on this improved foundation for 2025 and beyond,” Silverman told investors.
In recent years, Etsy has been working to counter the spread of mass-produced, generic goods from resellers on its platform to get back to its roots and keep shoppers returning to the platform. It’s also launched a gifting feature to provide personalized recommendations to shoppers, along with a loyalty program.
“So while others focus on cheap and fast, we’re focusing on creativity, self-expression, and elevating artisanal items,” Silverman said. “And while others rely on mass production and complex supply chains, we are empowering our nimble and unique seller base to thrive.”
The e-commerce industry is still absorbing the impact of President Donald Trump‘s recent tariff announcements, which target a popular tax loophole used by some online retailers. Trump suspended, then reinstated, the de minimis exemption, which allows exporters to ship packages worth less than $800 into the U.S. duty-free.
The loophole is expected to be shut again once the Commerce Department and customs officials put systems in place to process and collect tariffs on the millions of de minimis packages that flow into the U.S. daily. A significant portion of those packages originate from China.
Silverman said he expects Etsy to benefit from the tariffs and de minimis restrictions, unless the Trump administration targets European countries, in which case that “could create more friction on our buyers.”
“Etsy has much less dependence on products coming in from China, vastly less dependence,” Silverman said. “So I think to the extent that we see tariffs that are very focused on China … I think at least in the near term, Etsy is a net beneficiary.”