2006 was a bad year for Overstock.com (NASDAQ:OSTK). (As if any year isn’t bad for them?) Jason Lindsey even said that the 2006 numbers were “bad on purpose”:
“All of the things we have talked about before as far as classifying all of our SKUs as either red and green and 80% of our — excuse me, 20% of our inventory was doing 80% of our gross profits, or even more than that. We took all that to heart in the fourth quarter and although the fourth quarter results are very bad, and I admit they are very bad, they were bad on purpose. In other words, we used the fourth quarter to get rid of all the slow-moving inventory. I am quite pleased with the inventory balances we have now.”
Patrick Byrne spent much of 2007 bragging about the “turnaround” that the company was having:
“Again, it highlights 2007 was the turnaround year. I have had the pleasure of buidling or we have had the pleasure of building a near $1 billion business, me screwing up a near $1 billion business, and my colleagues fixing a near $1 billion business. We think we’re back and in the groove.”
Well, I suppose you have to give Byrne credit for admitting he’s totally incompetent. Then he says:
” …well, I know I said several times a year, a year and a half ago, that the turnaround prediction, that turnaround was going to look like this. We are going to start as as close to the bottom of the income statement as we could, and that meant getting the contribution dollars, the contribution profit turned around. That is gross profit minus marketing. You see that return to growth or hyper-growth. The you would see growth in gross profit dollars, and only last did you see revenue growth accelerate.”
Okay, so Byrne is touting that the company did less bad than they did in the past. He also goes on to talk about how contribution margin improved. But as Sam Antar shows, that’s all a bit of fiction, engineered by some funky accounting. More to come.