Overstock Misses Again

Overstock.com (NASD: OSTK) came out with quarterly earnings and, surprisingly, they weren't that good:

 Dear Owners,

     Gomen nasai.

Q3 was rough.  My bad.  I bit off more technology projects than my colleagues could chew.  The last bite, an ERP implementation, was one bite too many, and we choked on it.  This mistake resulted in two kinds of unfortunate results:

1.  Unexpected bad things happened.  We tested our new ERP system as much as time allowed, but in mid-August I cut-over earlier than I should have.  We anticipated that a small number of background processes would fail, but we had more trouble than expected.  Rather than pass the problem to the customer in the form of bad service, we ate the cost by doing a great many things manually that would normally be done automatically.  Of course, customer-facing issues (shipping products, processing credit cards, and handling returns) trumped internal issues.  One internal issue was our inability to post new products: this gradually reduced the number of products on our site (especially best- sellers).  This weakened sales (though we offset this for some time by running $1 shipping).  When we were able to upload new products in mid-September, sales snapped back to previous levels.

2.  Expected good things did not happen.  Some IT projects that were supposed to lift margins through improved efficiencies in logistics or customer service were either late or remain incomplete: some of these projects have since been delivered, some (e.g., a professional customer service application) have been scaled down and partially delivered, and some have been shifted to Q1.  Other IT projects that were supposed to yield marketing gains went unfinished.  One example:  Project Propeller's test results are extremely encouraging, but only rarely has it been turned on because the A/B test system required to fine tune the system has been low resolution and inconsistent. These projects did not get delivered because the work required to address the ERP problems eventually monopolized development resources and crowded out all other progress (until quite recently).

Yes, that's from their quarterly report.  The quarterly report of a real company traded on the NASDAQ.  A company with a $633 Million market cap. 

But it seems that folksy talk is paying off, because after opening down, the stock is up as of right now!

Still, all these misses don't help their argument that it's naked short-sellers driving their stock price down.  Really, the company just doesn't execute very well.

Update:  Oh, and apparently the CEO's opening salutation "Gomen Nasai" means "forgive me" or "sorry" in Japanese.  Whatever.

Comments

[Stu]

All correct, except that it was filed in an 8-K, not a 10-Q (Quarterly Report).

[The Stalwart]

The passage quoted here is from today's quarterly earnings release, not from an SEC filing.

[JL]

What extraordinary, welcome clarity in an 8-K. OSTK might just have a chance, with a CEO capable of writing such text.

[Kevin]

JL, the CEO is an idiot. He has repeatedly claimed that there is a "conspiracy" against him and his company.

For example, Overstock filed an amended complaint in California State Superior Court charging Rocker (a well known shortseller), his firm Rocker Partners and partner Marc Cohodes, along with the Arizona research firm Gradient Analytics, with libel and unfair business practices.

The filing claims that Rocker was behind "a wide-scale predatory campaign of knowingly distributing false, and overtly biased, written reports about Overstock to disparage Overstock and enrich themselves."

Overstock's CEO (Byrne) began his campaign against Rocker with an Aug. 11 conference call. With the help of a slideshow presentation, Byrne sketched out a network of more than two dozen fund managers, journalists, law firms and regulatory agencies he claimed were conspiring to drive Overstock's shares down.

Byrne claimed in the conference call that Rocker and other alleged conspirators were taking directions from a mastermind that Byrne called a "Sith Lord," a reference to a villain in the "Star Wars" movies. Byrne has not identified this alleged mastermind. An Overstock spokesman declined to comment on the person's identity.

Common, really! The Sith Lord? From a publically traded companies CEO?

I don't disagree that this 10Q release does contain remarkably candid language. It also doesn't say much. Basically it is summed up by "The ERP didn't work, my bad". This stock is a dog, has been a dog and will continue to be a dog. Hope I don't get sued...

[catablast! media LLC]

Managerial eccentricity and oddball behavior should raise red flags.

I remember when taser was sky high - the CEO was appearing almost daily on CNBC and all I could think was "man, this is one arrogant pri**"

I told myself that Taser (TASR) would one day taste the dirt.

I don't get OSTK's CEO: all he knows how to do is scapegoat externalities and dress his company's shortcomings in convoluted tropes and pop culture innuendo...

Pull up OSTK's daily chart -- this stock is caught in a major downtrend...

In fact, it looks like OSTK just came off a double top (first top in aug + second one in September)....

Kaboom! is my forecast......