Overstock Misses Again (OSTK)

The Stalwart submits: Overstock.com (NASD: OSTK) came out with quarterly earnings and, surprisingly, they weren't that good:

Dear Owners,

Gomen nasai.

Q3 was rough. My bad. I bit off more technology projects than my colleagues could chew. The last bite, an ERP implementation, was one bite too many, and we choked on it. This mistake resulted in two kinds of unfortunate results:

1. Unexpected bad things happened. We tested our new ERP system as much as time allowed, but in mid-August I cut-over earlier than I should have. We anticipated that a small number of background processes would fail, but we had more trouble than expected. Rather than pass the problem to the customer in the form of bad service, we ate the cost by doing a great many things manually that would normally be done automatically. Of course, customer-facing issues (shipping products, processing credit cards, and handling returns) trumped internal issues. One internal issue was our inability to post new products: this gradually reduced the number of products on our site (especially best- sellers). This weakened sales (though we offset this for some time by running $1 shipping). When we were able to upload new products in mid-September, sales snapped back to previous levels.

2. Expected good things did not happen. Some IT projects that were supposed to lift margins through improved efficiencies in logistics or customer service were either late or remain incomplete: some of these projects have since been delivered, some (e.g., a professional customer service application) have been scaled down and partially delivered, and some have been shifted to Q1. Other IT projects that were supposed to yield marketing gains went unfinished. One example: Project Propeller's test results are extremely encouraging, but only rarely has it been turned on because the A/B test system required to fine tune the system has been low resolution and inconsistent. These projects did not get delivered because the work required to address the ERP problems eventually monopolized development resources and crowded out all other progress (until quite recently).

Yes, that's from their quarterly report. The quarterly report of a real company traded on the NASDAQ. A company with a $633 Million market cap.

But it seems that folksy talk is paying off, because after opening down, the stock is up as of right now!

Still, all these misses don't help their argument that it's naked short-sellers driving their stock price down. Really, the company just doesn't execute very well.

Update: Oh, and apparently the CEO's opening salutation "Gomen Nasai" means "forgive me" or "sorry" in Japanese. Whatever.

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