EBay Inc. on Thursday gave investors some cheer in its final
report card before cleaving off payments division PayPal. The e-commerce
giant’s revenue rose 7% and its profit exceeded expectations, thanks primarily
to another quarter of rising sales for the payments unit. Revenue in eBay’s
core marketplace division, which will become a stand-alone company on Friday,
fell under the weight of currency fluctuations.
Shares of eBay rose as much as 5% and were recently up 4.8%
to $66.54. The results underscore how eBay’s core marketplace and its payments
divisions are headed in opposite directions as they end a fruitful 13-year
partnership.
PayPal’s revenue is now greater than that from the core
marketplace and continues to grow in the double digits. The marketplace
business, which essentially makes up the main eBay.com website, shrank for the
second straight quarter after several years of growth. As eBay plans for life
on its own, it will have to contend with sluggish sales and customer growth as
it faces down Amazon.com Inc. and new e-commerce entrants.
The San Jose, Calif., company also said Thursday it agreed
to sell its eBay Enterprise unit for $925 million to a group led by
private-equity firm Permira, which it expects to close next year, confirming
a Wednesday report by The Wall Street Journal. That compares with the $2.4
billion eBay spent to acquire the division in 2011, when it was known as GSI
Commerce.
Overall, eBay posted a profit of $83 million, or 7 cents a
share, compared with a year-earlier profit of $676 million, or 53 cents a
share. Excluding some items, per-share earnings were 76 cents, up from 70
cents, besting analyst expectations of 72 cents.
Sales grew to $4.65 billion from $4.37 billion, the company
said. Analysts had forecast revenue of $4.49 billion, the average of estimates
compiled by Thomson Reuters. In the marketplace unit, sales fell 3% to $2.12
billion, down from $2.18 billion a year earlier, and would have been a 5% gain
if adjusted for currency fluctuations. A year earlier, the division posted a 9%
sales gain. PayPal sales grew 16% to $2.26 billion, from $1.95 billion a year
earlier.
EBay’s incoming chief executive, Devin Wenig, said
on a call with analysts that eBay was still struggling to overcome the effects
of a data breach from last year and changes to search engine algorithms that
have suppressed its inventory. The company has offered a similar explanation in
the past few quarters.
EBay reiterated a June filing in which it said it expected
revenue from its marketplace division—which also includes ticket seller
StubHub—will remain flat or grow as much as 5% next year, not including the
impact of foreign exchange fluctuations.
Notably, eBay’s gross merchandise volume, the amount of
sales it helps facilitate, fell 2% to $20.1 billion, though it would have been
up 6% without the impact of currency fluctuations. PayPal’s net payment volume,
by contrast, jumped 20% to $65.9 billion.
After the companies part, they will continue to operate
closely, driven by a five-year operating agreement that, among other things,
dictates how much of eBay’s sales are funneled through PayPal. PayPal Chief
Executive Dan Schulman said he hoped to compel customers to use the
PayPal app two to three times per week, compared with the same frequency per
month today.
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