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Apr 19, 2017

eBay says Q2 profit won't meet expectations, shares drop

eBay office in Berlin, Germany

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eBay Inc. (EBAY.O) on Wednesday forecast second-quarter profit that fell short of analysts' estimates, as it spends heavily on revamping and marketing its e-commerce platform amid stiff competition from much larger rival Amazon.com Inc.

Shares of the company fell 2.5 per cent to US$33 in trading after the bell.

San Jose, California-based eBay has been making changes to its platform to lure more shoppers as well as better compete with Amazon.

That has meant a shift away from online auctions toward fixed-price sales and product landing pages, which are easier to navigate than the dozens of listings sellers would generate for a single good.

eBay has also increased its marketing spending, running a rare TV campaign ahead of last year's holiday shopping period.

Sales and marketing costs climbed 4.5 per cent to US$562 million in the first quarter ended March 31, while product development expenses jumped 16.3 per cent to US278 million.

The company's profit in the second quarter would be affected by "increased investment to drive improved user experiences and to market our brand," eBay's finance chief Scott Schenkel said on a call with analysts.

eBay said it expects second-quarter adjusted profit of 43 to 45 cents US per share. Analysts on average were expecting a profit of 47 cents US per share, according to Thomson Reuters I/B/E/S.

The company, however, stuck to its earlier forecast for full-year adjusted profit of US$1.98 to US$2.03 per share, expecting more growth in the second half of 2017.

The first quarter "showed some early indication that their efforts are beginning to bear fruit," said Wedbush Securities analyst Aaron Turner, citing more active buyers coming to the site. "We're still waiting to see" the outcome, he added.

eBay said gross merchandise volume, the total value of all goods sold on its websites, rose 2.4 per cent to US$20.95 billion in the first quarter. But the result fell short of analysts' average estimate of US$21.06 billion, according to research firm FactSet StreetAccount.

The company's net income rose to US$1.04 billion, or 94 cents US per share in the quarter, from US$482 million, or 41 cents US per share, a year earlier.

Excluding one-time items, the company earned 49 cents US per share, beating analysts' average expectation of 48 cents US per share.

Revenue rose 3.7 per cent to US$2.22 billion. Analysts on average had expected US$2.21 billion.