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GSI Commerce Plunges

Accounting errors send the stock down sharply.

Shares of

GSI Commerce


plummeted 22% after the operator of company Web sites cited accounting errors and cut its guidance.

King of Prussia, Pa.-based GSI was set to issue earnings Wednesday, but it now expects to release its results and hold a conference call by Nov. 10.

GSI Commerce said that in August, it discovered $283,000 in credits that were recorded in the company's 2004 fourth-quarter results should have been recorded in fiscal 2005. The company also found during the third quarter that a "systemic control" that it had relied upon to reconcile its accounts payable balance had failed. Based on a manual calculation, the company estimates it may need to record a charge of as much as $300,000, or a gain of as much as $1.2 million. No further details were disclosed in a statement and a company spokesman declined to comment.

"While we remain positive on the business long-term, today's news should shake investor confidence in GSIC's ability to execute," wrote Goldman Sachs analyst Anthony Noto in a note to clients. He rates the company's shares as in line.

Investors concurred. The shares fell $4.11 to $14.94 in early afternoon trading.

In its preliminary results, GSI Commerce said its net loss in the quarter was between $4.2 million and $4.5 million, or about 10 cents a share. That's worse than the $2.5 million to $3 million loss GSI Commerce had forecast in July. Profit for the year will be between $5.5 million and $6.5 million, lower than its previous guidance of $9.5 million to $10.5 million.

"The company notes that the estimated shortfall in net income compared to its guidance issued for the third quarter on July 27 is the result of the cost of partner launches being greater than anticipated, and to a lesser extent because of delays in actual launch dates," GSI Commerce said in a statement. "These issues had a particularly negative impact on the second half of the third quarter."

Analysts had forecast a loss of 6 cents a share on sales of $85 million in the third quarter, according to Thomson Financial. Profit for the year was seen at 23 cents a share.