retail watch | Nov 3, 2022 |
Wayfair’s third-quarter earnings continue its downward trend

The intersection of home furnishings and e-commerce remains a difficult location for retailers—especially if your address is Wayfair.com.

The giant online home retailer reported another round of largely negative financial results Thursday morning, continuing a long-term performance trend that was only interrupted by a profitable spike during the height (or perhaps depth?) of the pandemic last year.

With declines in top-line sales, most individual customer matrices and another loss on the bottom line, Wayfair told investors on its quarterly earnings call that it remains confident that it is on its way to better times with new merchandising, sustainability and service initiatives it is rolling out now and in the months and years ahead. “Controlling the controllables” was the mantra espoused by co-founder and CEO Niraj Shah, indicating that the company expects to cost-save itself out of its current red ink.

But for this third quarter, it was clear that Wayfair has its work cut out for it. Total net revenue was down 9 percent from a year ago, to $2.8 billion. That’s 14 percent down from the previous quarter in 2022. International sales dropped even more acutely, declining 24 percent versus 6 percent for domestic sales. On the call, Wayfair said business in Europe was especially bad, largely due to the struggling macroeconomy in the U.K. and Germany. The overall sales decline resulted in a net loss of $283 million, or $2.66 a share. Yet Wayfair said its cash situation remains strong with $1.3 billion on its books for the quarter. Active customer counts also declined 22.6 percent, with orders delivered during the quarter dropping 20 percent to $8.7 million.

On the positive side, average order size was up to $325 from $283 a year ago, resulting in a 13 percent jump in net revenue per active customer. Repeat customers represented 77.8 percent of total orders versus 76.3 percent for the same quarter a year ago.

With its total business struggling amid the universal slowdown in home furnishings sales and e-commerce as shoppers return to in-store activity, Wayfair focused on cost-cutting measures to get back to profitability—a level it has only attained for a few quarters in its 12-year public life. “We’re continuing the work we set out last quarter to control the controllables and orienting Wayfair in this environment around … driving cost efficiency, nailing the basics and earning customer and supplier loyalty every day,” said Shah in the earnings statement.

While not giving a specific forecast as to when the company would return to profitability beyond saying it would be “in short order,” Shah made it clear that he has his eye on prospective cuts. “We have direct visibility to over half a billion dollars in savings with work well underway to deliver this target in 2023,” he said.

While Wayfair’s messaging focused on both its merchandising strategies and back-end logistics, analysts seemed to focus their questions on cost cutting and expenses. Wayfair did not comment, nor was it asked for an update, on its physical store rollout plans going into next year. The retailer opened several smaller stores for two of its sub-brands—AllModern and Joss & Main—earlier this year, and is reportedly slated to open its first Wayfair-bannered location in 2023, a 100,000-plus-square-foot store in the Chicagoland market. But even as it described its “omnichannel strategy,” Wayfair remains woefully behind the curve in moving into physical stores. The lack of attention to its plans for more locations seems to indicate it will remain that way for the foreseeable future.

Wayfair’s quarterly performance, while clearly subpar, did not represent any increased rate of decline from its past several periods and is consistent with many other retailers in both the online and home spaces. Some, like Bed Bath & Beyond and Overstock, have been worse; while others, like Williams-Sonoma and Ethan Allen, have been better.

Yet even with its optimism for its long-term prospects, Wayfair is a company still digging itself out. Though its share registered a slight 6 percent gain in early morning trading on Thursday, Wayfair’s stock price is off more than 80 percent for the year, and at about $38 a share, is a tenth of the price of its 52-week high. Wayfair remains between a rock and a very hard place.

Homepage image: ©Vitalii Vodolazskyi/Adobe Stock


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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