What happened
Shares of Wayfair Inc (W 1.89%) were moving higher today after the online furniture retailer posted another quarter of strong top-line growth, beating estimates. As a result, the stock was up 10.6% as of 10:50 a.m. EDT.
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So what
Wayfair said revenue jumped 47.7% in the first quarter to $1.4 billion, edging past estimates of $1.36 billion as the retailer continued to demonstrate the large opportunity ahead in home goods e-commerce. However, gross margin fell 150 basis points in the quarter to 23.1%, showing that Wayfair is still struggling to build scale and gain leverage.
Other expenses like SG&A, operations, and technology also grew faster than revenue, meaning its bottom-line loss widened. Adjusted loss per share fell from -$0.48 a year ago to -$0.91, and missed expectations by a penny at -$0.90.
CEO Niraj Shah shared his thoughts on the quarter, saying, "We are really pleased with the growth we are seeing across our business and the market share gains this growth represents. Overall, we are delighted with how the business performed in Q1 and are excited to build on this strength moving forward."
Now what
Wayfair has been volatile lately as the stock has given up gains this year after it skyrocketed 129% last year. Investors were rattled by a widening loss in the fourth quarter of 2017, sending the stock down more than 20%, but seem to have given it a pass this time around even though results were similar. The market doesn't seem to know what to make of the company, as its revenue growth is impressive, but whether it can ever turn a profit in an increasingly competitive market is questionable.
For the current quarter, the company sees revenue increasing 40%-43% to $1.56-$1.59 billion, better than the analyst consensus at $1.49 billion. The quarter is also benefiting from Way Day, the company's new annual selling holiday, which seems to borrow from Amazon's Prime Day. On the bottom line, the company expects negative adjusted EBITDA margins of -2.1% to -2.4%, indicating it still sees ample losses.
Wayfair's huge revenue growth is a sign of the company's potential, but it's up to the market to determine how long it can go without moving toward profitability.
