What happened
Shares of Wayfair (W -1.59%) slumped 26.7% in October, according to data from S&P Global Market Intelligence, after the online home-furnishings retailer announced mixed third-quarter 2019 results and warned of potentially decelerating growth.
The stock slumped nearly 19% on Oct. 31 alone, the same trading day as its quarterly update was released.
A room decorated with Wayfair products. Image source: Wayfair.
So what
More specifically, Wayfair's quarterly revenue grew a strong 35.2% year over year to $2.305 billion -- comfortably above consensus estimates for $2.27 billion. But that growth came at a price, translating to a net loss of $206.7 million, or $2.23 per share, widening from a per-share loss of $1.28 a year earlier and badly missing estimates for a loss of $2.10 per share.
Co-chairman Niraj Shah noted the company achieved its impressive revenue growth despite short-term volatility spurred by tariffs.
"To further cement our leadership position and growth trajectory, we have continued to expand our logistics network to meet a high level of customer demand in both North America and Europe and, among other initiatives, are driving deeper penetration in emerging category opportunities across the business," Shah said.
Now what
If investors weren't already spooked by Wayfair's bottom-line miss, management added to those concerns during the subsequent conference call by guiding for fourth-quarter revenue of $2.48 billion to $2.525 billion -- up roughly 24.5% year over year at the midpoint, but well below Wall Street's consensus of $2.67 billion.
During the call, CFO Michael Fleisher said: "In Q3, we demonstrated that short-term headwinds from tariffs or otherwise are something we can effectively manage. So [while] these may take several more months to work through, we remain more focused on the long-term drivers to our success partnering with our supplier partners to provide customers with a massive selection across all classes of home goods; exceptional customer services; and an easy, fast, and seamless delivery experience."
It's hard to fault Wayfair for focusing on its long-term potential rather than propping up near-term growth. But until it shows more tangible signs of its short-term headwinds waning, I suspect the stock will have a difficult time pulling out of its current slump.
