Etsy shares rise on healthy Q2 revenue boost

Dive Brief:

Artisan marketplace Etsy Tuesday reported 39% revenue growth in the second quarter of $85.3 million, up from $61.4 million the year before. The company also boosted its outlook for the year, forecasting revenue growth of 25% to 28%, beyond the high end of their three-year guidance between 20% and 25%.
Losses widened to $7.3 million from $6.4 million year-over-year, or 6 cents per share compared the loss of 7 cents per share a year ago. Analysts surveyed by FactSet had forecast a loss of 1 cent per share on revenue of $80.6 million.
Etsy shares climbed 4.6% after hours on the news, according to MarketWatch.

Dive Insight:

Etsy attributed its revenue jump to a 22.6% increase in gross merchandise sales, growth of its base to 1.7 million active sellers and 26.1 million active buyers, and sales from enhanced seller services.

The growth was driven by both Marketplace and Seller Services revenue: Marketplace revenue grew 22.8%, primarily from increased transaction fee revenue and, to a lesser extent, listing fee revenue. Seller Services revenue grew 58.1% year-over-year and was driven primarily by revenue growth in Direct Checkout, which continued to benefit from the integration of PayPal, the company said.

For a while there, Etsy seemed to in danger of impairing the backbone of its success—its artisanal focus. As the company grew and made changes to appease Wall Street since its IPO, it alienated some of its biggest fans, who complained of too many mass-produced items for sale there, not to mention outright counterfeit goods, which financial services firm Wedbush last year warned was increasingly becoming a problem.

Etsy has made moves to mitigate those issues—for example, instituting methods for sellers to manufacture goods that aren’t necessarily made by hand but still fall within the sort of small-scale manufacturing that fits with the site's ethos.

In fact, its newly energized attention to sellers seems to have made all the difference.

"During the second quarter, we expanded our global community to include approximately 1.7 million active sellers and 26.1 million active buyers," CEO/chairman Chad Dickerson said in a statement. "We accelerated our GMS growth and provided high impact services to help our creative entrepreneurs start, grow and manage their businesses. This continued focus and discipline led to growth across all of our key metrics and, as a result, we are raising our financial outlook for 2016."