(Bloomberg) -- Overstock.com Inc. is poised to take advantage of the inventory glut plaguing retailers like Target Corp. and Walmart Inc.
The e-commerce company specializes in helping chains liquidate slow-moving merchandise, and now it will have more opportunities than usual. US retailers racked up excess goods to ensure shelves stayed full during the pandemic. But now shoppers have shifted spending to categories like services and travel, leaving warehouses overflowing.
That may help Overstock rebound from a rough stretch. Its shares have fallen 48% this year, while sales have declined for three straight quarters.
Under Chief Executive Officer Jonathan Johnson, the company also shifted to selling mostly home goods, which traditionally have better margins and been growing faster than other categories. And surging US inflation is likely to push shoppers to the deals found on Overstock, according to Michael Pachter, managing director at Wedbush, who feels Overstock’s extensive selection at a range of prices offers a competitive advantage.
“In an inflationary environment, consumers tend to look for the lower-cost solution,” said Pachter, who estimates Overstock will end this year with its sales little changed. That would come after revenue fell 19% in the first quarter.
Overstock was founded in 1999 to help retailers sell off inventories during the dot-com bust. Johnson, who joined a few years later and succeeded founder Patrick Byrne as CEO in 2019, decided to move the company away from what he called a “liquidator of all things” into a “retailer of home furnishings.” That evolution paid off during the pandemic when Americans splurged on their properties. Overstock’s shares surged by 580% in 2020 and kept rising last year.
“They’re well suited to be the best house on the bad block in either a period of an all-out recession, or just slowing interest in the home category,” said Tom Forte, an analyst at D.A. Davidson. Overstock will benefit from all this excess inventory, he said.
For his part, Johnson expects supply-chain disruptions and the retail industry’s inventory woes to continue into next year. The latest Covid-related port closures in China have provided a much-needed reset, he said. They gave US ports time to catch up, but China ramping back up could create more bottlenecks.
“The supply chains are still not normalized,” Johnson said. “The ports are slow. Trucks are slow. Delivery is expensive because of oil prices.”
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