Wayfair Shares Surge After Earnings Top Estimates and Sales Stay Above Pre-Pandemic Levels

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  • Online furniture retailer Wayfair said active customers grew to 31.1 million, a nearly 20% year-over-year increase.
  • During the quarter, Wayfair said, its average order value was $278, higher than the $277 a year earlier.

Wayfair shares jumped 10% Thursday after the furniture seller's second-quarter results showed it is holding on to some of the gains it made in its business during the pandemic.

Earnings topped estimates, and even though sales declined and fell short of Wall Street's expectations, revenue was above pre-pandemic run rates.

Wayfair benefited from surging demand during the pandemic as consumers spent more money online during lockdowns. Shoppers were also focused on improving their homes as they spent more time working and relaxing there.

But Wayfair's latest results show it was was able to hang on to some of these new shoppers. The company said active customers grew to 31.1 million, a nearly 20% year-over-year increase.

"Many of you have had questions as to whether Wayfair can be sustainably profitable as the pandemic recedes, and this is clear evidence to make that case," CEO Niraj Shah said during an earnings conference call. "Consumer balance sheets are strong and interest in the home is not going away post pandemic."

"While there may be some short-term rebalancing towards brick and mortar, over the next couple of quarters, we're convinced the structural trends towards e-commerce will hold and potentially, accelerate," Shah added.

Shares of the company rose nearly 12% at one point Thursday, eventually closing at $276.16. The stock is down 25% from its 52-week high of $369, which it reached on Jan. 14, as investors worried its pandemic boost was unlikely to last.

Here's how the company did for its second quarter ended June 30 compared with what analysts surveyed by Refinitiv were anticipating:

  • Earnings per share: $1.89 vs. $1.15 expected
  • Revenue: $3.86 billion vs. $3.94 billion expected

During its second quarter, the company reported a net income loss of $130.4 million, or $1.14 per share, compared with $273.9 million, or $2.54 per share, a year earlier.

Excluding items, the company reported earnings of $1.89 per share, beating the $1.15 per share expected by analysts surveyed by Refinitiv.

The company reported a revenue of $3.86 billion, compared with expectations of $3.94 billion. Revenue fell about 10% year over year, but rose 11% compared with the first quarter of this year.

Net revenue per active customer in the last 12 months was $478 as of the end of the second quarter, an 8.6% increase year over year.

"The home remains a high priority for our customers and longer term tailwinds to online category growth are firmly in place," Shah said in the earnings release.

During the quarter, Wayfair said, its average order value was $278, higher than the $277 a year earlier.

The company delivered 13.9 million orders during the quarter, decreasing 26.5% year over year.

Repeat customers placed 10.5 million orders in the quarter, representing 75.6% of total orders. Orders from repeat customers decreased 17.6% year over year.

"We believe we are leaving the pandemic period with an even stronger repeat customer base than when we entered it. We should have long-lasting benefits, given it cost us relatively less to drive repeat purchases than initial orders," Shah said.

"On the surface, what you'd see is a modest decline in active customer count and slightly lower order frequency. But zooming out, you would recognize that we acquired nearly 18 million new customers over the course of 2020," Shah said.

While retailers have said that delays in every point in the supply chain have reduced stock, Shah said Wayfair is seeing sequential improvements in inventory availability and fulfillment.

"But the progress is incremental and does not happen overnight. Some port congestion is easing, and our Asia-based international supply-chain services are growing quickly to support our suppliers," Shah said. "Yet, the industry still has to deal with narrower selection and lower-than-desired lead and delivery times, which are unlikely to normalize until some point in 2022."

The long-lasting supply-chain delays are also resulting in inflation.

"We're working with our suppliers to pass through some of these higher costs while paying close attention to our customers' reactions to higher pricing across all of our classes," Shah said. "So far we believe customers are generally absorbing the higher prices reasonably well."

After four quarters of growth above 40%, its revenue was expected to drop 8.4% for the second period, according to StreetAccount.

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