Trade Me CEO on those critical new goods sales - and life after Fairfax
If Trade Me's metapmorphisis goes to plan, you'll see a lot more new goods for sale - both from small time retailers and, more so, brands like Hannahs and Glassons that populate the Stores section of Trade Me today.
Both Trade Me and the brokers that cover it see the sale of new goods a major growth driver in the years ahead.
Last time NBR checked in with Trade Me CEO John Macdonald, he was bullish about new goods, saying Christmas 2013 would see a big push in the area.
Talking to Trade me today after a solid half-year result (net profit edged up to $37.4 million for the six months ended December 31 from $36.4 million year earlier; Ebitda climbed 14% to $59.2 million; revenue gained 18% to $80.4 million), Mr Macdonald was lower key on new goods. He saw growth this Christmas, but put more emphasis on holiday seasons to come.
And certainly, new goods growth is not go-go at this stage.
Mr Macdonald told NBR that new goods sales were up only slightly at an annualised rate of $180 million.
"We've certainly put a lot of ou work into the sale of branded new goods," the Trade Me boss said.
"Having said that, our [bramded new goods] sales were pretty flat. We haven’t seen the results we’d like to see." There's been a lot of work behind the scenes, but so far "it hasn't manisfested itself in a lot of external change."
Investors seemed disappointed that growth was slowing overall; Trade Me shares [NZX:TME] was down 2.49% to $4.30 in late trading - albeit after a recent run-up.
And what of the much-vaunted channel aggregator partnerships, designed to draw retailers from Australia and futher afield into Trade Me's Stores section.
The CEO still has high hopes in the medium to long term. Be he admitted today, "The onboarding of retailers and scaling up is taking a bit longer than we thought. There's no one cause; it's just everything taking a bit longer than we thought."
Mr Macdonald said Fairfax was a "model owner and shareholder. It didn't look to influence us in any way." Bar a little bleating about rising classified fees, most Trade Me users would agree.
Now, he's heading into uncharted territory. The CEO will spend the next two weeks visiting major investors, and those who've recently upped their stakes, answering questions face-to-face.
Mobile visits, but not mobile sales
Forsyth Barr has identified mobile as a growth driver for Trade Me, and today Mr Macdonald touted that one third of visitors to the site are now on a mobile - double a year ago.
NBR asked how many completed transactions via mobile.
The CEO could not immediately give a figure, but said it was proportionately a lot lower than PC-based visitors.
Another point of difference: mobile visitors stay on the sites for around two minutes per visit, Mr Macdonald said, versus around 15 minutes for those on a PC.
More acquisitions - but keep in perspective
This morning Mr Macdonald raised the possibility of new acquisitions.
But talking to NBR, he sought to dial down expectations on that front.
While Trade Me wasn't revealing specific purchase prices for its recent deals, he said Holiday Homes and Trade Vine (a service that helps retailers get online) were both bought for under $2 million.
Casting around for local start-ups, the bill was not likely to get any higher. "We're looking at healthy NZ businesses on a good growth path. Almost by definition there are not many in New Zealand worth more than $2 million," Mr Macdoanld said.
He added, "There's nothing to stop us doing a larger acquisition if we found the right target." This could be overseas. He stressed that overseas should not automatically be read as Australia which "has lot to like, but strong incumbent competition."
Trade Me is also entering uncharted territory in terms sailing past the 12-month guidance path outlined in its IPO prospectus.
The CEO reiterated his company was not giving any forecast for the next six months.
He did say the company is comfortable with analysts' forecasts. Trade Me is expected to post net profit of $77.5 million on sales of $163.9 million, based on the median forecasts compiled by Reuters.
Forsyth Barr has a hold rating on Trade Me, based on value. The company is running ahead of the broker's 12-month target ($4.10).
In a note issued after the result, Morning Star said Trade Me's fair value was $4.00, up from its pre-results estimate of $3.40.