MercadoLibre’s Results Aren’t as Bad as Many Feared
Posted by WorldTimeNews on 8th November 2018
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The hits kept coming in recent quarters with a postal rate hike and a truckers’ strike, both in the company’s largest market, Brazil.
Net revenue, including the recent accounting changes (more on that below), grew to $355 million, up 17% year over year, or 58% on a currency neutral basis, beating analysts’ consensus estimates of $348.6 million.
A change to U.S. accounting standards (ASC 606 for you accounting buffs) was implemented earlier this year by MercadoLibre, which required the company to subtract shipping incentives from both its revenue and cost of goods sold.
While it didn’t have any impact on the financial results, it does make the top-line growth rate appear much lower than it would otherwise, as this chart shows:
In the current quarter, it accounted for a full 23% of top-line growth, but is now excluded from revenue — making it appear that revenue growth is slowing, when it really isn’t.
In Brazil, MercadoLibre’s biggest market, the company instituted a flat shipping fee of 5 Brazilian reals (about $1.35) on all items that sell for less than 120 reals (about $32.50).
MercadoLibre believes that this decision will help its business in a number of ways, but will be a short-term drag on the number of items sold.
It will, however, serve to grow the average purchase ticket total and improve the economics on its free shipping program.
Despite some recent challenges, MercadoLibre is still the leading e-commerce platform in Latin America, and continues to expand its offerings to merchants and customers alike, including payments, shipping, and financial services.
The Motley Fool owns shares of and recommends MercadoLibre.

After a somewhat brutal second quarter, there were a lot of concerns for investors in MercadoLibre (NASDAQ:MELI). The company has historically had to deal with geopolitical and economic instability. But earlier this year, an accounting regulation change — which had no effect on the bottom line — made top-line growth appear to slow, marking a confusing transition for those who follow the stock.

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