Yesterday, on eBay’s earnings conference call, CFO Bob Swan had some worrying things to say about the outlook for U.S. consumer spending going into the holiday shopping season.
“First, from a macro standpoint, Europe and [Asia-Pacific] — which created a bit of anxiety for us in the first half of the year — have stabilised through Q3,” said Swan during the call. “But at the same time, the U.S. e-commerce softened considerably, [and] we have a cautious outlook for the holiday season.“
During the Q&A, analysts pressed Swan on the outlook for fourth-quarter consumer spending, resulting in the following exchange (emphasis added):
Ronald Josey III – JMP Securities: Just a real quick, Bob, if you can go back and talk about the stabilisation you saw in EU and Korea and the impact in Marketplaces. I’m wondering is that just better macro or the result of the marketing investments, I think, you made during the quarter. Then also, domestically, any additional colour as to why you think holiday might be a little bit weaker this year would be helpful.
Bob Swan – SVP, Finance and CFO: Yeah, in terms of Europe and Korea, as you may remember, back in July we had a bit of anxiety just about the signs that we were seeing in both of those markets and how it was impacting our business. During the course of the third quarter, in essence, we looked at stable growth for 11%, Q2, 11%, Q3, and things kind of stabilised, and what, at the time had caused us the greatest anxiety. I think there’re some things that are working well in terms of what we’re doing and some things that aren’t, but in the aggregate, we got nice fundamental strong businesses with good stable growth. That’s kind of a first. Secondly, holiday week or — the reality is the thing that’s caused the most angst is a dramatically decelerating, what we believe is a dramatically decelerating U.S. ecommerce growth rate from the second quarter of 15.5% to 16% from comScore to the third quarter of closer to 13%. So when we came into the third quarter, we looked at a stable U.S. market, and lo and behold, in a relatively short period of time, we’ve seen a pretty rapid deceleration in the market. I think for us, that deceleration happened throughout the course of the quarter. Then, as always, we take all the information we have at our disposal, which right now is roughly 15 days in, and we haven’t really seen any more positive signs in October than what we experienced through the latter part of the third quarter in the U.S. So all of that and all of the anxiety we see when we pick up the newspaper every day, makes us fairly cautious about how we look at the holiday season and it’s impacted our outlook for the fourth quarter. I hope I’m too conservative. But right now, all the signs point to a bit of caution.
Operator: Colin Sebastian, Robert W. Baird.
Colin Sebastian – Robert W. Baird: Maybe just one quick follow-up there on the deceleration in the U.S. Bob, I wonder what your level of confidence is on the Q4 outlook if there is no improvement in the U.S. into the holiday period given overall stable growth rate expectations? My other question would be on the new users coming from mobile. I think you’ve articulated in the past that they don’t monetise quite as well as other users, and I wonder though if you’re seeing a trend emerging among these cohorts is their tenure on eBay and PayPal, it starts to lengthen if the monetization is improving?
Bob Swan – SVP, Finance and CFO: I’ll do the first, John, and maybe hand you the second. I think in terms of the decel that we’re seeing in the quarter in level of confidence, we always try to — at the risk of repeating myself, we always try to give you our best flip based on everything that we are seeing. It’s hard to be really confident when lots of the fundamentals that we’re reading about are not all that positive. That being said, we’re not expecting really any improvement in the fourth quarter from what we’ve experienced for the last eight to 10 weeks. So we’re not expecting improvement. We’re just assuming that things are going to stabilise where they are. Ecommerce growth rates will not accelerate, but they will be stable. We think we’re well-positioned to deal with an environment that doesn’t get any worse than it kind of is right now.
Today, eBay shares are down more than 3% on the company’s weak fourth quarter guidance.