Wayfair (NYSE:W) recently announced booming sales growth over the key holiday season quarter. The home furnishings specialist made progress in many of management's key operating goals, including winning market share and building out its (still unprofitable) international business.

Yet Wall Street looked past the good news to focus on the widening losses that Wayfair is booking even as competitors consider their own aggressive moves into the industry.

In a conference call with analysts, CEO Niraj Shah and his executive team explained why they see those losses as important steps on the way to significant annual profits. Here are a few highlights from that presentation.

A furnished living room.

Image source: Getty Images.

Gaining market share

Shoppers vote with their dollars and by taking a long-term approach to giving them the best possible experience, we are being rewarded with continued gains in market share.
-- Shah

Wayfair's 48% sales spike beat the 40% forecast that management had issued back in early November. That growth figure translates into significant market-share gains, too, as executives estimate the wider market is expanding at a 15% annual pace. Wayfair performed well on two other key growth metrics, with its customer base spiking 33% to 11 million as repeat shoppers rose to 62% of the total from 58% a year ago.

Taking control of shipping

We're operating 20 of our own last mile delivery facilities in the United States, up from 15 at the end of Q3, 2017, giving us coverage of approximately 60% of large parcel home deliveries.
-- Shah

Man looks over a warehouse.

Image source: Getty Images.

The company is making progress at building out its own shipping network, with the aim of reducing delivery times and adding efficiencies. As a result, the time it took to get bulky items to shoppers' homes improved by five days from the beginning to the end of 2017.

Wayfair noted higher customer satisfaction came along with that success, and so executives are eager to continue the process by opening additional shipment facilities in the coming year.

Spending more on advertising

With the majority of our ad dollars spent on digital channels and six years of data on customer behavior under the Wayfair brand, we are able to measure payback on an extremely granular basis.
-- CFO Michael Fleisher

Advertising spending amounted to just under 12% of sales for the full year, or far above the company's long-term goal of between 6% and 8%. Executives also forecast aggressive investments in this area for the coming quarters. Yet management said this boost wasn't a consequence of rising ad prices but instead reflected their increased confidence in the effectiveness of the program. "We will continue to invest behind these high [return on investment] activities, Fleisher said, "and we feel good about the customers we are acquiring who will add incremental value over their lifetime."

Costs are rising

We added 861 new employees in the fourth quarter for a total of 7,751 employees as of December 31, 2017. Approximately 520 of these employees were in variable cost areas of our business, namely customer service and in our logistics operations, and we expect to continue to build headcount in these areas as our business scales.
-- Fleisher

A person holding a credit card and using a laptop.

Image source: Getty Images.

Wayfair's ballooning costs played the biggest role in its expanding net losses over the holiday quarter. These expenses were mostly tied to sales growth, though, and so the management team isn't especially worried about them. In fact, executives said that adjusted earnings met their expectations in both the U.S. segment, which generated a slight profit, and in the international division, which booked significant losses in the period.

Looking ahead

Our direct retail gross revenue quarter to date has grown above 45% year-over-year, but given the increasing comp toward the end of the quarter, we are guiding to a lower level [than in] the fourth quarter.
-- Fleisher

Wayfair's outlook calls for sales growth to slow to between 40% and 43% in the first quarter from 48% over the holidays. Management said they were being "prudent" with this guidance, given that the prior year period included a big demand spike late in the quarter when delayed tax refund payments started hitting consumers' accounts.

The forecast still implies hefty market-share gains as the U.S. business grows at roughly double the industry's expansion rate and as the younger international segment rises by between 85% and 95%.

Costs, meanwhile, will continue to mount as Wayfair adds employees, acquires shipping facilities, and expands deeper into markets like Germany and the U.K. Overall, Shah and his team see adjusted profit worsening to a 4% loss from a 1.5% loss in the fourth quarter.