Though Overstock (OSTK -19.9%) officially reported Q4 net income of $73.6M (good for EPS of $3.01/share), that figure was inflated by a $72.6M income tax benefit stemming from a $79.7M deferred tax asset valuation release.
If not for the tax benefit, Overstock would've had Q4 net income of $1M, down from a year-ago level of $8.8M. EPS would've come in at $0.04, well below a $0.52 consensus.
Though its sales rose 16% Y/Y to $297.6M and slightly beat consensus, Overstock's gross margin only rose 10 bps to 18%. Meanwhile, sales/marketing spend rose 52% to $31.2M, and G&A/technology spend rose 19% to $39M.
Overstock says Google algorithm changes implemented in Q3 hurt the company's ranking "in certain Google search results during some periods." As a result, Overstock turned to other channels such as search ads, which contributed to a surge in marketing spend.