Holiday shoppers flock to Overstock.com

Overstock.com rode the wave of e-commerce during the holidays to an 18% increase in profits.

The online retailer said fourth-quarter revenues rose 18.3% to $470.4 million as the e-commerce heavyweight increased its average order size to $159.

The retailer also said its gross margin increased by 0.2% to 18.2% due to improved warehouse efficiency, lower inbound freight costs and reduced credit card fees.

Net income totaled $1.36 million or 6 cents per share. That was well below the previous year’s fourth quarter totals of $69.5 million or $2.92 per share. However, the 2013 fourth quarter included a $68.5 million income tax benefit from a reversal of the valuation of deferred tax assets.

For the 2014 calendar year, revenues totaled $1.5 billion, an increase of 14.8% from $1.3 billion in 2013. Net income for the year was $8.85 million or 36 cents per share. In 2013, the totals were $84.4 million or $3.56 per share, including an income tax benefit of $68 million.

The company said sales and marketing expenses jumped 19% in 2014 due to increased spending in the sponsored search and display ad marketing channels. That was partially offset by a drop in television advertising in the fourth quarter, Overstock said.

Overstock.com’s 18% quarterly revenue growth is in line with growth in e-commerce as a whole; e-retail sales increased 16% in the first nine months of 2014, according to the U.S. Commerce Department, which reports Q4 results in February.

Several estimates of online holiday sales put growth in the range of 14-17% for November and December 2014. Despite beating revenue projections, a 19% jump in spending on marketing and sales contributed to Overstock.com missing its Q4 earnings expectations of $2.84 per share by a wide margin, coming in at 6 cents per share.

Overstock.com plans to expand its Club O rewards program, which accounts for 20% of the site’s sales, CEO Patrick Byrne said. The company’s growth strategy includes expanding international sales and distribution. Byrne said Overstock.com plans to open its first warehouse in China during the second quarter. Also on the online retailer’s agenda in the coming months: a video-on-demand service that would have about 30,000 titles. Byrne also touted the online retailer’s improvements in internal search technology.