eBay Cuts 2014 Revenue Guidance, Signaling Lowered Holiday Expectations

EBay lowered its forecast for 2014 annual revenue, raising fears that online retailers could be in for a tough holiday season.

The company said it now expects 2014 revenue between $17.85 billion and $17.95 billion, down from previous guidance of $18 billion to $18.3 billion. The drop in guidance appears to be directly related to lowered expectations for the all-important holiday fourth quarter. The midrange of eBay’s fourth-quarter revenue projection is $4.9 billion, compared to analyst estimates of nearly $5.2 billion.

EBay’s stock was down about three percent in after-hours trading. Things could have been worse, but eBay beat analyst expectations on earnings in the third quarter and missed slightly on revenue. EBay earned 68 cents per share, excluding some items, on $4.35 billion in revenue, compared to analyst expectations of earnings per share of 67 cents on revenue of $4.37 billion.

We should get more information about the reduced guidance on the company’s call with investors at 2 pm PT. Analysts will also presumably have a ton of questions about the planned spinoff of PayPal, and what it means for both companies.

Update: On the analyst call, eBay made it clear that its core Marketplace business is still reeling from the double whammy of a hack of customer information and penalties from Google that knocked some of its pages out of Google search results. EBay required all of its users to reset their passwords as a result of the data breach. Marketplace revenue grew just six percent in the third quarter, compared to 12 percent in the same period last year.

“EBay is clearly facing some near-term challenges,” CEO John Donahoe said in prepared remarks at the beginning of the call. “It’s growth is neither what we wanted nor what we expected.”

As a result, eBay is making a series of changes to try to recover. CFO Bob Swan said the company will make adjustments to its customer login process and increase customer support to help win back users who have had to repeatedly reset their passwords. It will also increase marketing to help compensate for the hit from the hack.

EBay will also craft a new search engine optimization strategy, though the company didn’t reveal many details. The goal is to improve its rankings in Google search results following the penalty. Still, Swan warned that organic — or unpaid — search results will “not pop back up in the next one, two, three quarters.”

Swan added that the company expects to complete its spinoff of PayPal in the second half of 2015.

This article originally appeared on Recode.net.

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