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E-Retailers Own the Day, Especially Overstock (OSTK)

On a day that saw Ebay (NASDAQ: EBAY) post gains of nearly 5%, it came as a surprise to many when direct competitor Overstock (NASDAQ: OSTK) posted even larger gains when each company revealed its numbers for the third quarter today. Ebay is, of course, a household name, but it was Overstock that shined as its share prices soared today to a gain of over 23%.

Overstock closed yesterday at $10.94, up $0.20 from the opening bell. That performance was not to be repeated today, but was instead overshadowed by the gains it showed nearly immediately after trading began. Its stock opened lower than Wednesday’s close at $10.80 but was quick to leave this number in its rear view mirror as it raced to a gain of nearly a dollar in the first hour of trading. The stock saw another large hourly gain at 11 AM when it reached a price of $11.45. It then showed no sign of falling back as it built to a price of $13.52 just before 3 PM, which was the high mark for the day. The stock had a brief decline and then made one last charge to the finish line of $13.50. Overstock ended the day with a gain of $2.56 or 23.4% with more than 861,000 shares changing hands, a twelve-fold increase in volume over the last 90 days.

These results came on the early announcement of Q3 numbers that saw Overstock reversing its second-quarter fortunes. While few would argue that Overstock represents true competition as a small fish in a big pond given the presence of Ebay or the $110 billion giant squid that is Amazon (NASDAQ: AMZN), investors refused to be dismayed by the company’s size and drove it to a record day.

The size of the surprise and turnaround was substantial. Overstock today reported third-quarter net income of $2.7 million, or $0.11 per share, compared to a loss of $7.79 million, or $0.33 per share, last year.

Gains in revenue were not as noteworthy. Sales increased 6.5% to $255.4 million from $239.7 million in the third quarter of 2011. Overstock explained the growth in sales as primarily due to increases in the number of visitors and average order value, which offset declines in conversion rates and the aggregate number of orders.

Additional numbers that contributed to Overstock’s gains today included:

  • Spending on sales and marketing increased 8.0% to $14.9 million from $13.8 million.
  • Spending on technology declined 6.4% to $16.1 million from $17.2 million in the prior year.
  • Spending on general and administrative expenses declined 9.8% to $13.8 million from $15.3 million.

Each of these numbers seemed to give investors the impression that Overstock recognizes that far too many people who shop online are unaware of its presence and, while getting the word out is imperative, it is necessary for the company to tighten its belt as it is asking customers to loosen their own.

Overstock may never become the powerhouse that is Ebay or Amazon, but it appears to be looking to a future where one or the other of the aforementioned competitors may need to pay it more attention.

Published by Brendan Byrne

While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. You may contact Brendan via his email ([email protected]) or his Google+ page (https://plus.google.com/u/0/116608759701551457422).

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