The first physical Wayfair store will open on May 2, 2024 in Wilmette, Illinois.
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Online home furnishing company wayfel The company’s chief executive likened the current slowdown in the home furnishings category to the 2008 financial crisis, which led to lower sales in the fiscal second quarter.
“Our credit card data shows that category adjustments now reflect the magnitude of the peak-to-trough decline experienced by the home furnishings industry during the financial crisis,” Wayfair CEO Niraj Shah said in the release. “Customers remain cautious in spending on home purchases. “
The e-tailer’s revenue and profit missed Wall Street expectations.
Here’s how Wayfair’s fiscal second-quarter performance compared to Wall Street expectations, according to an LSEG survey of analysts:
- Earnings per share: Adjusted 47 cents, expected 49 cents
- income: $3.12 billion vs. $3.18 billion expected
The company reported a loss of $42 million, or 34 cents per share, in the three months ended June 30. .
Sales fell to $3.12 billion, down about 2% from $3.17 billion a year earlier. Sales slowed even though the average order value rose to $307 from $313 in the quarter and after the company opened its first large-format store.
For more than a year, home furnishings companies like Wayfair have seen weak demand for items like new sofas and dining sets as the overall housing market stagnates under the influence of high interest rates. Consumers are buying fewer new homes, which means they have fewer reasons to buy new furniture. Additionally, with stubborn inflation, they are more picky about how they spend their discretionary income, and home goods are less of a priority when it comes to choices like restaurants, new clothes and travel.
Wayfair needs discounts to attract customers and doesn’t expect the category to recover until interest rates fall and the housing market rebounds.
“The declines we’re seeing are similar to the declines we saw between 2008 and 2010, which I think is an indication that the category has just gone through a massive correction, whereas we’ve only had GDP recessions before,” Kate Gulliver, Wayfair’s chief financial officer, told CNBC. express.
“Obviously, technically we as a country are not in a GDP recession right now, so that’s somewhat unique to this category… We’ve seen recession-like corrections in this category over the past few years. ”
Federal Reserve Chairman Jerome Powell said that as long as economic data continues on the current trend, an interest rate cut could come as soon as September, with an easing likely to follow soon thereafter.
Shah said Wayfair, which implemented a series of massive layoffs to bring its cost structure in line with the current scale of the business, has struggled to become profitable, but the quarter was its best in three years for free cash flow generation and adjusted EBITDA, Shah said.
The company’s adjusted EBITDA for the quarter was $163 million, still below Wall Street expectations of $168 million, according to StreetAccount.
Shah said: “While revenue remains challenging, we operate the business with the goal of achieving substantial growth in profitability this year. This will also be our mindset every year going forward.”
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