EBAY eBay Inc

By Greg Bensinger 

EBay Inc. failed to lift sales during the lucrative holiday season and signaled a tough start to the year, troubling signs for the online marketplace that has been overshadowed by Amazon.com Inc.

The San Jose, Calif., online marketplace on Wednesday reported $2.32 billion in sales in the fourth quarter, virtually flat with a year earlier and the fourth straight quarter without growth. Profit dropped by more than half to $477 million.

EBay expects the rough patch to continue in the first quarter, projecting sales and profits will come up short of Wall Street estimates. EBay's shares fell more than 11% to $23.48 in after-hours trading.

The weak report card underscores eBay's struggles to convince consumers to begin their online shopping on its namesake site. The company has sought to boost its standing in Alphabet Inc.'s Google search results, but eBay says that project will take some time to show dividends.

"EBay needs to do a better job of getting customers to think of shopping there," said Kerry Rice, a Needham & Co. analyst. "The picture people have is used and collectible items."

EBay has fought that reputation for years as the majority of items it sells are fixed-price rather than by auction. But its efforts to take on Amazon and other retailers with new offerings from well-known brands have largely fizzled.

As a result, EBay has been embracing more cost-conscious consumers, while emphasizing the unique and hard-to-find inventory for which it became known. In some respects, eBay is returning to its roots as a pure marketplace after having sold off its Enterprise division and other assets, such as its stake in Craigslist Inc.

The period marks eBay's second without its PayPal Holdings Inc. payments subsidiary, which it spun off as its own publicly traded company last summer. By contrast, EBay's former division on Wednesday posted a 17% jump in sales, driving the shares up about 5% after market close.

"Six months ago we began a series of platform, inventory, and policy changes which we believe are critical to make our business more competitive over the long term," said Chief Executive Devin Wenig, acknowledging some of eBay's challenges on a call with analysts. "We don't expect to see material benefit from them for some time to come."

Mr. Wenig pointed to unfavorable foreign exchange rates as limiting sales growth. By that measure, sales would have gained 5%, eBay said.

In a first, eBay began disclosing some results for its StubHub ticket-sales site and its Classifieds ad-listing unit. StubHub logged $232 million in sales, up 34% from a year earlier, while Classifieds grew 2% to $183 million in sales. The company said it had no plans to disclose the units' profitability.

Excluding PayPal and the former Enterprise division, eBay's earnings from continuing operations fell 28% to $523 million.

EBay said the total value of merchandise it sold grew 4%, a slower rate than in the third quarter. The retailer's active buyers rose 1.9% to 162 million from the previous three months.

In this year's first quarter, eBay said it expects per-share earnings excluding certain items of between 43 cents and 45 cents on revenue between $2.05 billion and $2.10 billion. Analysts, on average, were expecting earnings of 48 cents a share on revenue of $2.16 billion.

For 2016, eBay sees per-share earnings excluding certain items of between $1.82 and $1.87 on revenue between $8.5 billion and $8.8 billion. Analysts, on average, were expecting earnings of $1.98 a share on revenue of $8.99 billion.

Write to Greg Bensinger at greg.bensinger@wsj.com

(END) Dow Jones Newswires

January 27, 2016 18:42 ET (23:42 GMT)

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