Overstock racks up losses, insists blockchain business is fine
US online retailer Overstock has released its Q2 2019 financial results, showing a 23% decrease in revenue and a 19% drop in gross profit.
Patrick Byrne, Overstock CEO and Founder, said that blockchain subsidiary firm, tZERO, "continues to expand its lead over the competition in the field of security tokens (which we believe is the killer app of the blockchain revolution)".
tZERO posted an almost $10 million pre-tax loss and also impacted its parent firm’s general and administrative (G&A) expenses. These clocked in at $32 million and $31.4 million in Q2 2019 and 2018, respectively, a 2% increase, representing 8.6% and 6.5% of total revenue for those periods.
"The increase was primarily due to a $6 million decrease in cryptocurrency gains from our Q2 2018 sale of cryptocurrency received during the tZERO security token offering, with no similar activity in Q2 2019," Overstock said in a shareholder announcement.
The overall blockchain business, meanwhile, is "generally progressing as planned, leading the effort to introduce blockchain products into the real world while focusing on the six areas we've identified as key components to building a technology stack for civilisation".
Total net revenue was $373.7 million and $483.1 million for Q2 2019 and 2018 respectively. The decrease was "primarily due to decreased product sales that resulted from a significant reduction in sales and marketing activities, which was part of our effort to return to retail profitability. In January 2018, we shifted our retail strategy to aggressively pursue revenue growth and new customers with a large increase in sales and marketing expenses. We discontinued this strategy in August 2018 and have returned to a disciplined approach to marketing."
Gross profit was $73.9 million and $91.7 million for Q2 2019 and 2018. This was mostly down to a decrease in net revenue in the retail business. "The increase in gross margin was primarily due to decreased product costs and decreased promotional activities, including coupons and site sales, due to our driving a lower proportion of our sales using such promotions. These decreases in gross margin components were partially offset by increased freight costs," Overstock said.