Chatty Overstock CEO and majority shareholder Patrick Byrne ventured onto CNBC last Friday after the market close and announced that the company was having “a nice Christmas.” He then also casually mentioned that the company’s gross margins were getting hammered (presumably as a result of the discounting necessary for the company to have a nice Christmas).
If Byrne planned to mention the margin compression before the CNBC shoot, he apparently didn’t tell his lawyers, because the company rushed to release an after-the-fact Reg FD press release this morning reiterating the comments. It explains why Overstock’s stock is down 16%:
THE HAPPY NEWS:
Chairman and CEO Dr. Patrick Byrne appeared on CNBC’s Closing Bell this past Friday and provided an update on the Company’s current quarter. “We are having a pretty nice Christmas,” he said during the interview where he mentioned that the company’s gross bookings had increased thus far during Q4 by approximately 10% over last year’s Q4 due to an increase in the order size of the average transaction.
THE NOT-SO-HAPPY NEWS:
Byrne also suggested that the company’s gross margins would be lower than they have been in recent quarters due to aggressive sales promotions and discounting. Byrne said that he expects Q4 GAAP net income to be between -1% and +1% of revenue and EBITDA to be between $5 and $10 million. He said that he believes the company will generate $50 to $60 million in operating cash flows in Q4 and that the company plans to expand the business internationally. “Next year we have an initiative to open up Canada and a couple countries in Europe.”
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