In another sign that the retail downturn is spreading beyond the malls to the Internet, auction giant EBay Inc. on Wednesday reported lower fourth-quarter earnings and its first-ever drop in quarterly sales.
The San Jose company blamed the faltering economy and the worst Christmas shopping season in 40 years. A stronger dollar, which reduced earnings from EBay's overseas operations, also hurt results during the quarter, the company said.
"Clearly we've been operating in an almost unprecedented external environment," Chief Executive John Donahoe said during a conference call. "This was an extremely difficult holiday season."
Its forecasts also fell short of analysts' expectations, sending EBay's stock sliding 7% to $12.35 in after-hours trading. It had risen 6% to $13.28 during the regular trading session.
Net revenue in the fourth quarter was $2.04 billion, down 7% from a year earlier and below analyst forecasts of $2.12 billion. Sales at EBay's Marketplaces unit, which includes its core auction business as well as Shopping.com, StubHub and other online operations, fell 16% to $1.27 billion.
Net income of $367 million, or 29 cents a share, fell 31% from a year earlier when the firm earned $531 million, or 39 cents. Excluding certain items, EBay reported income of 41 cents a share versus 45 cents a year earlier. That beat some analysts' estimates of 40 cents.
With the economy still contracting and the outlook for the dollar uncertain, EBay issued a downbeat forecast for the current quarter. The company said it expected first-quarter revenue of $1.80 billion to $2.05 billion, with net earnings of 21 to 23 cents a share and earnings excluding certain items of 32 to 34 cents a share.
In a recent report, analysts at Piper Jaffray & Co. predicted that online sales would fall 10% industrywide this year "as consumers rein in discretionary spending and significantly increase personal savings." E-commerce sales slid 3% in the fourth quarter, according to research firm ComScore Inc.
Donahoe, who took over as CEO in March when Meg Whitman retired, noted that EBay has been trying to weather the retailing downturn in part by cutting back on spending. The company laid off 10% of its 16,000-person workforce last year.
EBay's sales mix is shifting more toward fixed-price merchandise offered on a "buy it now" basis. Three years ago, 70% of the merchandise sold on EBay was through auctions, Donahoe said. Now, transactions are almost evenly divided between fixed-price and auction sales.
Donahoe said the company didn't favor one format over the other, but fixed-price sales were popular with EBay's high-volume "power sellers," noted analyst Sandeep Aggarwal of Collins Stewart in San Francisco. He said it also put EBay into more direct competition with powerful online retailers such as Amazon.com Inc.
For the full year, EBay reported net income of $1.78 billion, or $1.36 a share, on sales of $8.54 billion, compared with net income of $348 million, or 25 cents, on sales of $7.67 billion in 2007. The 2007 results included a $1.39-billion one-time charge.
EBay was the first of the big Internet companies to release results for the last quarter of 2008. Google Inc. is due to report today, followed by Yahoo Inc. on Tuesday and Amazon.com Inc. on Jan. 29.