Dive Brief:

• Overstock on Thursday reported that first quarter total net revenue fell 17% to $367.7 million from $445.3 million in the year-ago quarter, mostly due to a "significant reduction in sales and marketing expenses." Gross profit declined 22% to $73.1 million from $93.9 million a year ago, as gross margin shrank to 19.9% from 21.1%. The gross margin decrease was primarily due to increased freight costs, partially offset by decreased promotional activities, according to a company letter to shareholders.

• That total reflects the company's retail plus its blockchain operations, and retail's revenue alone fell to $362.6 million from $440 million a year ago, according to the release. The company's net loss narrowed to $42.9 million from $54.5 million a year ago.

• Overstock also said that Dave Nielsen will take over CEO and founder Patrick Byrne's role as president of retail, effective immediately, as Ron Hilton, who had been vice president of sourcing, takes Nielsen's role as chief sourcing and operations officer. Nielsen had recently returned after three years as CEO at cross border logistics company Global Access. Before that, he spent six years at Overstock. He's also held key roles at Payless and Old Town Imports, according to a company press release.

Dive Insight:

Overstock has dramatically overhauled its logistics and ended aspects of its marketing, and that's going to continue to the point that Byrne in his letter to shareholders Thursday said he expects the year's retail adjusted earnings before interest, tax, depreciation and amortization to reach $15 million instead of the previous guidance of $10 million.

"[E]xpense management has been aggressive," he wrote. "We have taken a tremendous (>25%) amount of cost out of our expense structure in the last 5 months. We are lean and fit as an organization."

The company's retail operations have become a boon, and executives said that's attracting potential acquirers. They reiterated that they're "exploring strategic alternatives" including the possibility of merging with a brick-and-mortar retailer, saying that a hybrid channel sales approach would be ideal.

The company's paid Club O loyalty program grew 32% year-over-year, and the percentage of sales from it is now "well over 25%," Chief Strategy Officer Seth Moore told analysts, according to a transcript from Seeking Alpha. "These members are extremely loyal and worth a multiple to us of what a standard customer is. Because of the growth in this loyalty program, it means we can be more targeted in our acquisitions rather than doing expensive and continuous reacquisition, the way so much of the Internet operates. We think this is really key to maintaining long-term profitable, sustainable growth."

Executives dismissed concerns about competition from a major online furniture and home goods rival, presumably Wayfair, or any impact from Amazon's recent move to speed up its Prime free shipping perk from two days to one.

"At this point I'm not in the game of trying to slug it out with a competitor ... who lost over $500 million last year," Byrne said. "We're going to have a company that spits out $50 million — a retail company that spits out $50 million a year. I'd rather have that company than worry about chasing a top-line again and having a company losing the kinds of money we would have to lose to compete there," he later added.

Regarding the changes to Prime shipping, Moore said that it doesn't affect furniture very much, and therefore doesn't affect Overstock, noting that there are "almost no furniture" pieces in Prime. He added that many home goods players that try it "end up stocked out in so many locations" because of the difficulties in inventory management.