Wayfair Q1 sales surge but loss widens

Wayfair Inc.’s sales grew nearly 20% in its first quarter as Americans spruced up their homes during the COVID-19 outbreak.  

“Home is becoming an area that customers are disproportionately investing into, and I would expect it to last for a while,” Wayfair CEO Niraj Shah told analysts during the company’s earnings call. 

The online home furnishings giant, which has yet to report a profit, posted a net loss of $285.87 million, or $3.04 a share, for the quarter ended March 31, compared with a net loss of $200.39 million, or $2.20 per share, in the year-ago period. Excluding one-time items, Wayfair lost $2.30 per share.  Analysts expected an adjusted loss of $2.60 per share

Net revenue grew nearly 19.8% to $2.33 billion, topping estimates of $2.31 billion. 

The company said it delivered 9.9 million orders during the quarter, up 21% year-over-year. Repeat customers, which accounted for 69.8% of total orders, placed 6.9 million orders, an increase of almost 28%. Average order value dropped $2 from a year ago, to $235 per order. 

Analyst Neil Saunders, managing director of GlobalData Retail, said that despite the surge in sales, the company’s first-quarter results make it clear it has failed to turn over a new leaf. 

“Kicking off the year over a quarter of a billion dollars in the red is far from auspicious,” Saunders said. “The source of the woe is, as it has always been, marketing costs. This quarter, Wayfair spent around $275 million on advertising – a 13% increase over the same period last year. This represents $13 for every active customer.”

Saunders added that while Wayfair has benefitted from remaining open during the pandemic while furniture stores are closed, the crisis provides only a short window of opportunity for online retailers. 

“As traditional shops reopen, some of the trade gained during the lockdown period will drift back to regular patterns of buying,” he said. “This is especially so for furniture where being able to see and feel products in person remains vital for many shoppers.” For more analysis, click here.