SAN FRANCISCO – Shares of online auction site eBay (NASDAQ:EBAY) fell Wednesday after the company reported a cautious forecast for the all-important holiday season with their third quarter earnings report. According to eBay, CEO John Donahoe the current retail environment in the U.S. is ‘fairly lackluster’ and cited uncertainty about the U.S. government situation as a major drag on consumer confidence.
While the company’s operations in Europe and Korea had been weak, the warning on U.S. sales is a new development. CFO Bob Swan told analysts during a conference call that ‘in a relatively short period of time, we have seen a pretty rapid deceleration in the market. We really have not seen any more positive signs in October. All of the anxiety we see when we pick up the newspaper everyday makes us fairly cautious about how we look at the holiday season.’
For the third quarter, eBay reported a 14 percent increase in review to $ 39 billion with profit of $ 837 million or $ .64 per share, an increase of 17 percent from the same period last year.
While the company forecast fourth quarter revenue of $ 4.5 billion and profit of $ .79 to $ .81 cents per share. Analysts were expecting eBay to earn $ .83 per share on revenue of more than $ 4.6 billion for the critical holiday season. The company did, however, stick to their full-year forecasts by Swan noted that results will likely come in at the low end of the company’s guidance.
According to Colin Sebastian, an analyst at R.W. Baird, ‘the commentary around a deteriorating U.S. environment will make investors a bit more nervous about the holiday shopping season.’ While Scott Tilghman, an analyst at B. Riley & Co. noted that ‘it looks like the shutdown will be resolved and the debt ceiling will be raised. But it may still impact consumer confidence and spending through the holiday season.’
While lawmakers were able to agree on a temporary spending bill and increase to the debt ceiling on Wednesday, it would appear that retailers would have one of their worst fourth quarters since the financial crisis. Ultimately, this could affect mega-retailers like Amazon (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT) both of whom have been cautious about the earnings outlook for the holiday season.
In the case of eBay, the company might be attempting to manage expectations by ‘embedding some caution’ into their fourth quarter forecast to reflect potential risks from the shutdown, the analyst explained. Tilghman noted ‘they don’t want to be in the position of being too aggressive. With all the chatter around the shutdown, it is very difficult to gauge consumers’ willingness to open their wallets this holiday.’
Shares of eBay were 4.43 percent in after-hours trading.