Overstock.com cofounder Jason Lindsey has resigned from the company’s board and has given up his titles of president and chief operating officer, an unexpected move likely to raise questions about the company’s holiday season performance.
Lindsey, who founded Overstock with CEO Patrick Byrne, stepped down effective the end of 2007; however, he will continue to work on special projects at the company for a time.
Lindsey had returned from retirement two years ago to help run the company after it struggled for traction in the e-tail space, positioning itself as an alternative to Amazon.com. A reliance on discounting has made consistent profits elusive.
‘A Less Active Role’
“I’m extremely gratified by the progress Overstock has made over the past two years,” he said. “But I’m ready to take a less active role in order to spend time on some outside ventures.”
Byrne, meanwhile, praised Lindsey for building the company from the ground up and for his decision to come out of retirement.
“When I screwed it up a couple years ago, he came out of retirement and has played a decisive role getting it back on track,” Byrne said. “Now that it is back in a solid trailing 12 month cash-flow-positive position, he wishes to return to our previous arrangement. While Jason won’t be as involved in the day-to-day operations of the company, he will still oversee special projects in a part-time capacity.”
Overstock shares were down nearly 9 percent in afternoon trading Thursday to US$13.79.
Questions About Its Outlook
Lindsey’s departure comes amid questions about how well Overstock fared during the just-ended holiday shopping season, which shaped up as a banner one for e-commerce in general and for some specific companies.
Salt Lake City-based Overstock, which traces its history to 1999, has long focused on selling overstocked items or excess inventory from other retailers or wholesalers. It last posted a quarterly profit in the fourth quarter of 2004, though as recently as October the company predicted it would turn a profit for the just-ended quarter and that it would be profitable for all of 2008. That news helped drive the stock to a two-year above $39.
Though Overstock has not backed off that prediction, recent comments from Byrne have raised questions about the outlook. Profit margins may not be as high as previously thought because of discounting activities, the CEO said last week.
In fact, Overstock had unexpectedly restarted its television advertising campaign during the holidays, Broadpoint Capital Analyst William Lennan said in a research note. That campaign had begun before Lindsey returned and has been a “giant expenditure sinkhole with disproportionately low returns” for the company.
“Lindsey’s departure occurs at a time when Overstock’s need for self discipline could not be greater,” Lennan wrote.
The departure of Lindsey may also resonate with investors because Byrne is perhaps best known for his long-time crusade against what he claims is extensive and secretive short-selling of Overstock shares, a practice that has helped keep a lid on the stock price even as the company’s overall performance has improved.
Competitors, meanwhile, may have pulled away from Overstock in the holiday season, which would make it harder for the company to stay profitable, Forrester Research analyst Carrie Johnson told the E-Commerce Times.
“Amazon has built the critical mass that enables it to strategically use free shipping and other promotions,” Johnson said. “That’s difficult for smaller e-tailers to match.”
Though Amazon has not yet reported fourth-quarter results, it did say last month that its holiday season was its busiest ever.
Overstock was the ninth most-visited site on Cyber Monday, drawing 2.1 million unique visitors, according to Nielsen//NetRatings. By comparison, leader eBay had 10.8 million visitors and Amazon more than 7 million.
Overstock did make progress in the way its site works. After having some outages and other problems during the 2006 holiday season, it ranked as the top-performing merchant site on Cyber Monday according to Gomez.
“The turnaround had showed signs of taking hold, and Lindsey was instrumental in that,” said Morningstar analyst Larry Witt. Lindsey had been a steadying hand who brought strong experience in merchandising and operational controls that have driven margin gains, Witt told the E-Commerce Times.
“Investors should pay close attention to the next few quarters to see what the long-term impact is,” he added.
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