GSI Commerce, the former Global Sports, Inc. and Global Sports Interactive, has apparently settled into a business model as it continues to grow revenues and narrow losses. Like its much larger competitor, Amazon.com, the business in its e-business format has never turned an annual profit, yet survives on the promise of a brighter future.
Like Amazon and eBay, GSIC is now focused on being an e-business enabler for its customers, the majority of which are now vendors or brand-owners looking for help in the direct-to-consumer arena. But the smaller GSIC — the brainchild of entrepreneurial wunderkind Michael Rubin — may face steeper challenges ahead as its larger competitors gets deeper into the sporting goods channel and set up their own partnerships with retailers and vendors.
Sporting goods sales were still the largest dollar volume contributor to the business in Q3, with sales jumping 49% to $25 million from $16.8 million in the year-ago quarter. The gain was “driven equally from new as well as existing partners”.
GSIC added Estee Lauder, Palm and Reebok in 2002, and partnered with NASCAR, Linens n Things and PBS in 2003. The NASCAR deal has been particularly strong here, with the partnership including a new catalog as well as a Web site.
The company is clearly focusing on building the non-sporting goods business going forward, as sales there surged 141% to $14.7 million. On a net merchandise sales basis, other revenue grew by 108.2% to $27.7 million, fueled largely by the addition of new partners beginning in the second half of 2002.
Total revenues for the third quarter increased 46.9% to $47.5 million, with the balance made up by fixed and variable service fees. The net loss for the quarter was $5.5 million, or 14 cents per share, compared with a net loss of $8.6 million, or 22 cents per share in the year-ago period. Gross margins improved by 50 basis points to 27.6%. Gross margin from product sales was “positively impacted primarily by stronger overall margins in sporting goods”, but partially offset by the “substantial growth” in lower margin electronics items.
GSIC expects to be “at or near even to break even” in EBITDA for the year, forecasting net income of $1.5 million to $3.0 million for fourth quarter on $82 million to $88 million in sales. In the year-ago period GSIC lost $14.8 million on sales of $75.5 million. Total year sales are seen in the $228 million to $234 million range with a loss between $12 million and $14 million.
>>> The big growth is coming from non-sporting goods partners. Sporting goods will likely be less of a focus as this e-commerce retailer, er
enabler, moves forward
