Shed no tears for Overstock.com’s revenue drop. While the company pulled in $187.4 million during first-quarter 2009, down from $202.8 million a year earlier, it trimmed its net loss from $4.7 million to $2.1 million during the same period. The quarter ended March 31.
The biggest shift between the quarters was an operational one. A year ago, fulfillment partner goods – those which the company never took physical possession of before selling – made up 74.5% of its sales. In the quarter ended, fulfillment partner goods amounted to 81.3% of its revenue.
Why is this important? Because the gross margin on fulfillment goods is higher than direct goods, which Overstock defines as those items it stores in its warehouse and physically sends out to purchasers. In first-quarter 2009, the cost of fulfillment goods was 78.3% of their price, down from 82.1% a year earlier. Conversely, the cost of direct goods as a percentage of their price rose, from 86.6% to 86.9%.
In fact, the company claims the 20.1% gross margin it generated during first-quarter 2009 is the highest it has ever achieved.
The company also trimmed its marketing expenses, spending $13.5 million during the most recent quarter, compared with $15 million a year ago.
The Eavesdropper’s Take: Keep your eyes peeled for shifts in product mixes. According to a transcript of the company’s earnings teleconference provided by Seeking Alpha, some high-end merchandise may be coming into Overstock’s hands. From the mouth of CEO Patrick Byrne: “…[H]igh-end brands that had never been open to selling [to? Through?] us before are calling and willing to sell. We’re trying to explore a consignment model which would…take [only] a few manufacturers or distributors to give it a try before people see the virtue of it.” Separately during the call, Steve Chesnut, the company’s senior VP of finance, noted that the site’s conversion rates and average order sizes were lower than last year’s levels.
