retail watch | Feb 22, 2024 |
After big cuts, Wayfair’s numbers are looking up

Wayfair has been telling its customers for years that it’s got just what they need. This past quarter, those customers returned the favor and gave Wayfair just what it needed: better results.

In reporting its fourth-quarter and fiscal 2023 financials, the online giant showed one of its first gains in top-line revenue since the pandemic, as well as a return to year-over-year gains in its active customer count.

However, there was still red ink on its bottom line for both the quarter and the year. These losses came as Wayfair continued to cut its overhead with another round of staff layoffs and other savings measures.

The Wayfair revenue gain for the quarter was 0.4 percent, or $13 million, for a total of $3.1 billion for the period, which included the 2023 holiday shopping season. For the U.S., which is the brand’s dominant market, the numbers were better, with sales up 0.9 percent for the year. In a period when the entire home furnishings space was struggling to beat its year-over-year results due to significantly reduced demand, any gains have to be seen as impressive.

“Q4 was another definitive step on our profitability journey and a reflection of the immense progress we achieved throughout the entire year,” said CEO Niraj Shah on a call with analysts. “Even in a difficult macro environment, we generated a 3 percent adjusted EBITDA margin and had our third consecutive quarter of positive adjusted EBITDA and free cash flow. In fact, on a revenue base that largely mirrored 2022, our free cash flow in 2023 improved by more than one billion dollars.”

Shah credited the company’s “large improvements in our core recipe across availability, speed and price competitiveness” for the positive results. “These improvements were directly responsible for our robust share expansion throughout the year, and for the step-up we saw in customer loyalty, including year-over-year growth in our active customer count by the fourth quarter.”

That active customer count increased 1.4 percent for the quarter, to 22.4 million. Orders per customer also increased, as did orders delivered for the period. Only net revenue per active customer was off, dropping 3 percent to $537.

Shah said even as the overall home furnishings business remains flat, Wayfair is gaining market share. “It’s important to call out that our success is not exclusively against smaller home-focused competitors,” he explained. “We’re also seeing share gains against some of the biggest retailers in the country.”

Starting this spring, Wayfair is hoping some of these gains come in the form of physical stores. Shah said the first Wayfair-branded store, in suburban Chicago, is now scheduled to open in May (several months later than the last announced opening). Many in the industry, including Wayfair suppliers, have been quite curious how the online experience will translate to a physical space: Even at around 125,000 square feet, it will no doubt be restricted in assortments and categories on the selling floor.

Next up is a new Wayfair branding campaign launching in mid-March, as well as a customer loyalty program coming this fall, he said. The design trade is also top of mind for the company, with Shah mentioning that its higher-end site Perigold was “executing very well” and growing at a “significant” rate. Wayfair does not break out individual nameplate performances, so there were no numbers to back up the words.

For Wayfair, it was the best series of announcements it’s had in some time, which reflects both internal improvements and the fact that it started to anniversary its weaker overall home furnishings business in the back half of 2022. The company seems to be making progress. The big question is whether Shah can turn his eternally optimistic outlook into consistent profitability.


Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.

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