Investing.com -- Etsy's (NASDAQ:ETSY) shares dropped sharply in premarket U.S. trading on Thursday after the company’s fourth-quarter earnings fell short of analysts’ expectations.
The e-commerce group posted earnings per share (EPS) of $0.62, missing the consensus estimate of $0.77. Revenue was reported at $842.3 million, surpassing the anticipated $827.67 million.
In the first quarter of 2024, Etsy forecasts a slight year-over-year decrease in gross merchandise sales (GMS). Analysts at Alliance Bernstein said in a note to clients that the projected decline, which Etsy expects to be in the low single digits, reflects "cyclical headwinds."
Like many retailers, Etsy has been impacted by consumers reining in spending on discretionary items during a time of high inflation and elevated interest rates. In a call with investors, Chief Executive Josh Silverman noted the business is seeing that people "feel their wall is under a lot of pressure."
The Brooklyn-based group also faces increased competition from low-cost players like Walmart, Amazon and Temu -- a risk that the Bernstein analysts described as "top-of-mind."
"[H]eavy discounting is winning right now," the analysts said.
Silverman echoed this sentiment, saying that many customers are "looking for the cheapest way to buy something when they need to buy something that is discretionary." In response, Etsy has been moving to help sellers on the platform with their marketing efforts, and has been testing promotional drives across the site. The firm has slashed its workforce as well in a bid to partly offset the impact of weaker demand for its craft and home decor items.
The take rate for the first quarter is projected to be between 21% and 21.5%, while the adjusted EBITDA margin is expected to be around 26%. For the entire year, Etsy expects revenue growth to exceed GMS growth, with the full-year take rate expected to be comparable to or exceed that of the first quarter.
Vahid Karaahmetovic contributed to this report.