Overstock CEO Jonathan Johnson joins Yahoo Finance live to discuss company earnings, supply chain concerns, and inflation.
- Online retailer Overstock.com among the companies reporting earnings this morning and those shares are up 18% after earnings per share came out ahead of analyst estimates. And revenue also beat estimates. Although, it did decline year over year.
Let's talk more about the numbers now with Jonathan Johnson. He is Overstock CEO. Jonathan, great to see you again. Man, we are seeing supply chain problems everywhere, seemingly. Talk to me about how you guys manage through that in the quarter and still managed to grow earnings per share, here.
JONATHAN JOHNSON: Yeah. So supply chain issues are real. I think we've done well in this area because we have such a distributed and broad supply chain, with thousands of partner suppliers. If one is out of that piece of outdoor furniture that you've been looking for, another one usually has something just like it that our customers have loved.
So for us, this broad distributed supply chain, or network, has helped even as the ports have been crowded, even as trucks and chassis are in high demand. So for us, it's been great. And that let us win the category for outdoor furniture over the summer. Have plenty of products for sale. We're going to keep at it. And I think we're in good shape for the holiday season.
- Hey. It's Brian Cheung here. You know, I'm someone who has felt the supply chain issues. I'm trying to move right now. And I'm seeing couches that are listed online that I might not be receiving until March of 2022. I guess I'll just have to sit on the floor until then.
When you talk about broadly distributed, how does that differentiate you from other types of, let's say, furniture companies, for example, where if you're a West Elm, you only have X amount of products available on your site. Whereas, Overstock, you're sourcing from so many different places. Is the variety one big reason why you've been able to hedge against the supply chain issues?
JONATHAN JOHNSON: Yeah, the variety is important. Also, we don't list anything for sale on our site unless it's in a warehouse and ready to ship. So when you're purchasing something from Overstock, you don't have to wait till March.
But what I really think is, with so many suppliers, if one of them doesn't have that black leather, mid-century modern sofa that you're looking for, another one will. And they've been able to move their manufacturing, shift which ports they come into, call in favors with shipping companies. They've done very well to keep us in supply.
The other thing I think it's important is we don't demand that our suppliers put their product in our warehouse. And in a time of high demand, low supply, no supplier wants to tie their inventory up in one distribution channel. And we think that's why we're getting more look at product in our inventory.
Our inventory levels are higher today than they were a year ago. They're not yet back to where they were pre-pandemic. But we've got plenty of product in stock and ready to sell.
- This is really interesting John. So the suppliers that you deal with, you mentioned a couple of the different elements that might be enabling them to get product in where others aren't. I mean, what is the big differentiator here? Because you know, if you hear sort of the anecdotes, you get the impression that every couch in America is stranded in a boat off the coast of California. How are your suppliers-- what are they doing differently?
JONATHAN JOHNSON: Well, there is a lot of furniture bobbing around in the Pacific, waiting to get into LA and Long Beach. Our suppliers, this is their business. They're not a manufacturer. They know how to get product into the United States. And they're smaller. They're nimble.
They may be doing smaller lots. And so they can call on a trucker to get one free or two free open chassis to get product into warehouse. It really comes down to having suppliers rather than huge buyers in a big box store that are a little bit more nimble in dealing with maybe smaller sizes of inventory, getting product to our site.
- What's the pricing power look like headed into the holiday season? I see on your home page, you already have the holiday home sale promos up there already, I guess. We haven't even hit Halloween yet, though.
What is the pricing power? Because you know that with these supply chain issues, people might be willing to pay whatever it takes. But at the same time, what is the elasticity that you have to not scare away consumers?
JONATHAN JOHNSON: Well, look. Our customer wants smart value. They want the most product they can get for the money. And we're not looking at this kink in the supply chain, high demand, low supply, as a chance to take up gross margins.
We're trying to keep our gross margins around 22% which is relatively low because we see a secular shift from brick and mortar to online. We think this is the right time to focus on taking market share. And we'll run our business efficiently, keep trying to bring in mid-single digit, adjusted a bit to our bottom line.
But we think, right now, we can take market share. As people learn and understand the ease of buying furniture and home furnishings online, we want them to know they can do that best with Overstock.
- Jonathan, thank you so much. Just a couple of numbers on that point. Active customers for you guys last quarter up 5%. Average order value up 24%. Jonathan Johnson, Overstock.com, thank you so much for being here. Appreciate it.