SAN FRANCISCO - eBay ( EBAY) disappointed investors with its dim outlook for the fourth quarter as a stronger dollar hurts its business overseas, while the company faces a weakening economy at home. Shares of eBay were off 4.1% in after-hours trading to $14.70 after falling more than 13% in Wednesday's regular session. The online auction site posted third-quarter earnings of $492 million, or 38 cents a share, compared with a loss of $936 million, or 69 cents a share, in last year's quarter, which included a hefty goodwill impairment charge. Excluding certain items, eBay posted earnings of $592 million, or 46 cents a share. That topped analysts' expectations of 41 cents a share, and came in above the company's own guidance. Revenue, however, fell short of Wall Street estimates, totaling $2.12 billion. Analysts were expecting revenue of $2.13 billion. eBay also reported a 1% decline in gross merchandise volume in the third quarter. That marked a significant slowdown from the second quarter, when gross merchandise volume was up 8% -- and even more so in comparison to a year ago, when it was up by 14%. For the fourth quarter, eBay expects revenue to range between $2.02 billion and $2.17 billion and earnings in the range of 39 cents a share to 41 cents a share. That was much lower that Wall Street predictions for revenue of $2.44 billion and earnings of 47 cents a share. eBay pointed to a number of reasons for the low forecast, including a stronger dollar that will likely hit fourth-quarter revenue by $200 million. It also cited the slowing economy and eBay's decision to pour more marketing dollars toward attracting more buyers to the site, which would cost it about $150 million.
Chief Executive John Donahoe described the economic environment as "very challenging," and expects more of the same for the all-important holiday season. "Consumers are under significant pressure and seem to have reined in their discretionary spending," added Chief Financial Officer Bob Swan during Wednesday's conference call with analysts. Both Donahoe and Swan emphasized eBay's efforts to diversify its portfolio of businesses to assure future growth. That includes its recent acquisitions of online payment service Bill Me Later as well as two online classified ad sites in Denmark. The two executives also discussed the various changes introduced through the course of the year, including fee restructures and a ratings system meant to draw more people to the site. Donahoe pointed out that buyers are starting to respond, making more purchases from sellers who have high ratings and less from those with low ratings. Nonetheless, the change hasn't translated into more dollars being spent on the site, he said. Donahoe also addressed the notion that eBay was moving away from its original auction-style format toward fixed prices as a way to better compete with Amazon ( AMZN). "Are we promoting fixed price at the expense of auctions? The answer is no," he said, adding that eBay is simply trying to offer buyers more choice by improving the fixed-price format. eBay has clearly moved aggressively when it comes to fixed pricing. It recently cut listing fees for its Buy It Now format by 70% and extended the listing periods to 30 days from seven days.
Fixed-priced listings as a percentage of gross merchandise volume has been growing as a result. In the third quarter, they represented 46% of the company's gross merchandise volume, up from 43% in the second quarter.