Dive Brief:

• Revenue at online furniture retailer Overstock fell 19% to $536 million, a larger decline than the company expected.
• "What we didn't anticipate ... was the level of impact that macroeconomic factors would have on the business, such as consumer sentiment and spending resulting from a steep rise in inflation, coupled with various impacts of the war in Ukraine," CEO Jonathan Johnson told analysts in a conference call.
• The company's operating income fell by more than half, to $12.5 million, according to a release, while gross margin held steady from last year at 23.4% for the quarter.

Dive Insight:

Overstock went into Q1 expecting a tough period, given that it stacked up against explosive growth in 2021. This time last year, Overstock nearly doubled its revenue, as consumers continued refreshing and adding to their homes amid pandemic restrictions and behavioral changes. 

But the pare-back in consumer spending was bigger than the company expected. Active customers, at 7.4 million, fell by 26% while delivered orders fell by a third to 2.4 million. Net revenue per customer, however, increased by 26%, and average order value increased 21%.

Johnson pointed to global and macro events as a factor in the demand decline. "I do think things like the war in Ukraine and record high inflation make a difference," Johnson said, according to a Seeking Alpha transcript. "We've seen in the past, whether it was 9/11 or the Iraq [War] or different things that major news events like this cause people to pause. And so, that seemed to have a real impact in March."

Overstock's Q1 report could portend more general declines in the home goods space, as other retailers compare against months in 2021 when consumers were spending stimulus payments and the economy was rebounding quickly, in part thanks to the distribution of COVID-19 vaccines last winter and spring.

For instance, Bed Bath & Beyond's fourth quarter, which includes January and most of February, brought a 22% sales decline. Part of the decline was due to roughly $175 million in lost sales due to out-of-stocks.

For home goods retail, inventory is no small matter. The furniture sector has been particularly challenged by supply chain delays. Largely without the option of air freight, furniture retailers have had to absorb ocean shipping delays, building in longer lead times on orders and carefully managing customer expectations. Others have been working to source closer to the U.S. to reduce shipping uncertainties.

Johnson told Retail Dive earlier this spring that Overstock — which helped pioneer drop-shipping and today relies largely on the method — has maintained a policy of selling only goods on its site that are already in domestic warehouses, ready to be picked, packed and shipped.

Despite the macroeconomic and supply chain pressures, Overstock has made significant headway in its turnaround. The first quarter marked the retailer's eighth straight profitable quarter. The pandemic helped the company shrug off years of losses and organizational distraction as the company pursued expensive moon-shot experiments in blockchain technology under its previous CEO, Patrick Byrne.

When Johnson took the reins as CEO after Byrne's departure, which happened under a cloud of controversy, the new chief refocused the company around retail. “If you just mind your P’s and Q’s, [retail] is a business as old as Cain and Abel having a farmers market and a butcher shop,” Johnson told Retail Dive in 2021. “If you do it right, you can make money.”