DSW Abandons E-commerce Start-Up Ebuys – WSJ – Wall Street Journal
said Tuesday it is shuttering Ebuys business, calling it quits on an e-commerce company it bought for $62.5 million just two years ago.
DSW bought the parent of retail sites ShoeMetro and ApparelSave in March 2016 in a bid to expand its online presence and grow sales, but the e-commerce startup proved to be more a burden.
DSW tried to make the investment work by installing new leadership at the business last year. But in November, the company wrote down the value of Ebuys on its balance sheet by $52.7 million after taking a loss on the business because of huge markdowns to clear inventory.
After being unable to find a buyer for Ebuys, DSW said it expects to complete a liquidation process within the next few months. The company will book one-time charges related to the exit.
“The challenge of sourcing the right merchandising in a sustainable way and the requirements to scale the business entails unacceptable economics in the near term,” Chief Financial Officer
told analysts on a conference call Tuesday.
Ebuys was a fulfillment business that sold discounted shoes on third-party marketplaces such as Amazon and
On Tuesday morning, ApparelSave’s eBay store and ShoeMetro’s Amazon store showed no inventory.
“The business model for this just wasn’t their core competency and they had bigger fish to fry,” said
an analyst at Susquehanna Financial Group, which helps facilitate DSW stock trades. He said Ebuys was a distraction and was happy to see the business go.
Jeff Van Sinderen
said incumbent competition from
Zappos and traditional retailers also made the road to profitability tougher for Ebuys.
Mr. Poff said during DSW’s brief stint as owner it gained insights into online marketplace sales it will use to bolster its digital platforms against rivals. Over the past year, the company said its mobile app has grown to have nearly five times more monthly active users.
DSW also said some of the tax savings generated from the new tax law will go toward increased marketing for its recently redesigned website and app.
Many retailers have looked to e-commerce startups to jump-start sales growth and give them an edge in an increasingly digital landscape, but not all deals have paid off. Nordstrom lost $197 million in 2016 on Trunk Club, which it bought in 2014, and
Hudson’s Bay Co.
wrote down the value of its division that includes its Gilt business last year.
In its fourth quarter, DSW topped views. The retailer reported a profit of $11.7 million, or 15 cents a share, down from $30.5 million, or 38 cents a year earlier. Excluding costs related to Ebuys, the tax overhaul and other items, earnings grew to 38 cents from 20 cents.
Shares of DSW jumped 10.1% to $21.59 on Tuesday after the company reported revenue growth.
Total revenue grew 6.7% to $720.0 million and comparable sales rose 1.3%, compared with the 1% expected by analysts polled by Consensus Metrix.
Analysts polled by
had forecast earnings of 27 cents on $728.17 million in sales.
The stock is up 0.7% this year while the S&P 500 has risen 4%.
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