Immediately following the release of Wayfair (W -1.08%) earnings on Tuesday, shares traded down by as much as 9%. But a more careful look at Wayfair's performance shows a company that is still growing at a breakneck pace. While profitability is still a faraway concept for the company, it is doing all it can right now to win market share as customers show that buying furniture and home decor online is not a fad.

A Wayfair-advertised living room including a chair, couch, coffee table, lamp, and pictures on the wall.

Image source: Wayfair

Wayfair earnings: The raw numbers

Before getting into the nuts and bolts of what made this a particularly strong quarter, let's review the headline numbers for the company.

Metric

Q2 2016

Q2 2017

Change

Revenue

$787 million

$1,123 million

43%

EPS

($0.54)

($0.26)

Loss narrowed by 52%

FCF

($20 million)

($27.2 million)

Loss widened by 36%

EPS = earnings per share. FCF = free cash flow. Source: Wayfair . EPS represents non-GAAP (adjusted) figures.

As with many companies that are trying desperately to grab market share away from both established brick-and-mortar players and the 800-pound gorilla in the room -- Amazon.com -- profitability is still a far-off goal for Wayfair. Analysts don't expect the company to be out of the red until fiscal 2018. And even then, it's only expected to bring in $0.41 per year.

That being said, the company is gaining traction. While revenue was up 43% for the year, operating expenses jumped just 30% -- accounting for the significantly narrowed loss in EPS. At the same time, it's clear that Wayfair's brand is gaining strength. Of all the orders placed during the second quarter, repeat customers accounted for 61%. Clearly, there's a reason these customers are coming back. The company reported 9.5 million active customers, up 43% year over year.

If we look at key metrics for the company, trends continue to be positive.

Growth at Wayfair
Infogram

What else happened during the quarter?

There were a number of other important developments  in the quarter.

  • Management announced that the company now has 7 million square feet of storage space, up from 1 million just 18 months ago.
  • Because of this, delivery of small packages is down to 2 days in major metropolitan focus cities, and 14 days for large packages.
  • Revenue from international operations in Canada, the U.K. and Germany was up 136% to $126 million -- or about 11% of sales.
  • The company released an augmented reality app that allows customers to have as close to an in-store experience as possible from a smartphone.

Taking all of these things into consideration, CEO and co-founder Niraj Shah said, "As consumers increasingly embrace the selection and convenience of shopping online instead of in physical brick and mortar stores, we are taking advantage of that shift and capturing market share by offering a truly differentiated, customer-centric shopping experience."

Looking ahead

During the conference call, management said  that direct retail revenue was growing above 40% year-over-year in the current quarter. For the quarter, the midpoint of guidance calls for $1.17 billion in sales, which represents a 36% jump. Direct retail revenue in the United States is expected to grow at a midpoint of 38.5% while international sales are expected to jump 90%.