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A Look at Overstock’s Retail Division’s Revenue Performance

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Oct. 1 2019, Updated 3:52 p.m. ET

Revenue missed estimates

In the trailing four quarters, Overstock (OSTK) has missed estimates on three occasions while reporting a beat just once. Since last May, Overstock has stressed that changes in natural search engine algorithms made by Google have been negatively affecting its revenue.

The company’s increased promotional activities negatively affected its top line. In 2017, Overstock called Wayfair (W) the “elephant in the room.” Wayfair is a fast-growing online retailer of home furniture and home decor.

In the first half of 2018, Overstock missed its sales estimate by 1.9% in the first quarter but beat the estimate by 1.9% in the second quarter. Year-over-year, its revenues in the first and second quarters rose ~3% and 11.8%, respectively.

The company has been making tremendous changes to its SEO to deal with the Google algorithm issue. The company is pumping money into marketing, which has led to growth in its revenue in the first half of 2018.

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Overstock recently opened a distribution center in Kansas to enhance its delivery operations. As per the press release, Carroll Morale, vice president of the company’s supply chain, said, “Selecting Kansas City as the home of Overstock’s newest fulfillment center allows us to offer over 99% of our U.S. customers two-day shipping options, improving shopping experiences by getting orders into the customer’s hands as soon as possible.” The distribution center is likely to become functional in October.

Why does Overstock want to offload its e-commerce unit?

Overstock has long been finding a suitable buyer for its retail operations as it moves toward the blockchain, but the search so far has been unsuccessful. However, in the company’s second-quarter press release, CEO Patrick Byrne stated, “Discussions with potential buyers have progressed since our last call and based on those discussions, we believe more modest growth and optimized cash flow is also the preferable path to complete a sale.”

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