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Overstock Falls Short

But the stock jumps anyway.


posted a weak fourth quarter and said it would need two or three quarters to recover from an internal systems pratfall.

The Salt Lake City-based online retailer didn't break out the quarterly bottom line in its earnings press release, saying it was working out some finer points on an accounting change with its auditors. The heavily shorted stock rallied 5% as CEO Patrick Byrne made yet another melodramatic appearance on Wall Street's stage.

Overstock said fourth-quarter revenue rose 44% from a year ago to $318 million, leaving it well short of the $338 million Thomson First Call estimate. The company's quarterly loss was harder to figure, as Overstock didn't specify one in the earnings release. But according to Piper Jaffray analyst Aaron Kessler, the company swung to a fourth-quarter loss of roughly $4.1 million, or 22 cents a share, from the year earlier profit of $2.4 million, or 12 cents.

Analysts surveyed by Thomson were looking for a nickel-a-share loss. Kessler, who rates the shares underperform and whose firm has done investment banking for Overstock in the past, was looking for a 26-cent-a-share loss.

Overstock shares, which have dropped 19% since the start of the year, rose $1.21 to $23.96.

The positive reaction didn't make sense to some observers. "It is certainly possible that there is short-covering," says Rebecca Jones Kujawa, an analyst with Stanford Group in Boca Raton, Fla., who rates the shares hold.

Overstock did grace investors with an actual statement of its full-year results. The company lost $24.9 million, or $1.29 a share, for the year ended Dec. 31, compared with the year-ago loss of $5 million, or 29 cents a share. Revenue rose 63% to $803.8 million.

Byrne, after last year saying he aimed to post a 60%-100% revenue gain for 2005 with a break-even bottom line, conceded that the company failed to attain the latter goal.

After a good start to the year, the CEO said, Overstock "discovered that some of our systems were more shopworn than we had anticipated, and went on a crash program to replace them. Unfortunately, I underspec'ed them and underestimated the time it would take to complete them by a large factor. Meanwhile, the systems they were replacing were increasingly unstable, so that our ships were burned behind us and we had to march forward.

"While we have staunched the bleeding, I anticipate it will take six to nine months to rehabilitate the patient and get him running again," Byrne said. "During this time that we are hardening our new systems, we will reduce growth to industry rates."

Byrne told investors to "expect slower growth from us in 2006, but also expect us to end 2006 as a stronger and more focused company."

That may be easier said than done as large bricks-and-mortar stores including



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continue to gain strength online. Last week, online giant


reported a disappointing fourth-quarter profit.

Byrne's taste for media attention came to the fore last summer when Overstock sued Rocker Partners, which owns 8% of Inc.


, publisher of this Web site.

Overstock accused Rocker Partners of spearheading a campaign to drive down the company's share price by helping to promulgate tainted stock research and manipulating various press organs (including, at times, this one) and other entities. The suit named David Rocker, his fund and various employees, as well as Gradient Analytics, a research outfit Overstock implied was in league with the short-sellers.

The suit alleged unfair business practices and negligence and claimed that Gradient's research reports were "simply platforms for the Rocker defendants to pursue its investment agenda of having Overstock's share price being kept as low as possible."

In a subsequent conference call and two


interviews, Byrne claimed a short-selling conspiracy had been carried out against his company at the behest of "one of the master criminals of the 1980s" who was "supposed to end up with our company." He declined to name the figure but likened him to the "Sith Lord" of

Star Wars


Rocker and Gradient have denied wrongdoing. The matter is being investigated by the

Securities and Exchange Commission