EBay’s year-long slide appears to be nearing its bottom.
The e-commerce company reported July 22 that second-quarter sales declined 4 percent, a less moderate drop than the ones eBay was experiencing a year ago. Earnings of 37 percent per share, excluding special items, beat Wall Street analysts’ consensus estimate by a penny, though net income fell 29 percent compared with a year ago.
While not spectacular, the results gave investors hope that the worst may be over for eBay, and that Chief Executive John Donahoe’s turnaround plan may be taking hold. Shares of eBay gained nearly 5 percent in extended trading July 22, after closing up 52 percent, or 2.75 percent, at 19.45.
“I knew the eBay turnaround was going to take over three to four years, and the first 18 months of a turnaround are always the hardest,” says Donahoe in an interview. The former Bain & Co. consultant laid out a long-term plan for the company when he took the helm early last year. His strategy includes shedding weak businesses and creating a one-stop online shopping site where buyers can bid in auctions, peruse classified ads, or buy products outright. “This is good, steady progress,” he says of the second-quarter results.
Donahoe: Changes Helped Earnings
EBay has suffered from weak consumer spending, and merchants turning to other Web sites like Amazon.com and Craigslist for their transactions.
Donahoe attributes the stabilization in eBay’s business partly to changes the company has made to its e-commerce site, including improved search and the elimination of some fees it charged to put items up for sale. Early signs of a comeback in consumer spending have also helped. “In the last couple weeks of June we saw an uptick, and that uptick has kind of held,” Donahoe says.
Colin Sebastian, an analyst with Lazard Capital Markets, says the results are “encouraging…