Please ensure Javascript is enabled for purposes of website accessibility

Why Wayfair Stock Tanked Today

By Evan Niu, CFA - Mar 9, 2020 at 12:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The online furniture specialist recently downplayed coronavirus risks, but investors are still worried.

What happened

Shares of online furniture retailer Wayfair (W 9.58%) have tanked today, down by 11% as of 1:20 p.m. EDT, after the broader market aggressively sold off. Ongoing coronavirus fears and a steep decline in oil prices are heightening concerns around the possibility of a global recession. Wayfair recently downplayed the potential impacts of the COVID-19 illness outbreak.

So what

While discussing fourth-quarter results with analysts last month, CFO Michael Fleisher said that Wayfair was not incorporating coronavirus risks into its outlook.

Wayfair logo

Image source: Wayfair.

The finance chief suggested that Wayfair's business model would be fairly resilient because customers will have plenty of alternatives:

The spread of the coronavirus and how impactful it might prove, if at all, is something we are keenly focused on. Our current guidance does not factor in any significant potential disruption due to the virus. We believe our marketplace model, where we offer vast selection to our customers, is an important mitigating factor for us. So, just over half of our suppliers' product is now manufactured in China.

Suppliers based in China have already been diversifying operations in response to tariffs imposed as part of President Trump's trade war, Fleisher added.

Now what

Still, a macroeconomic slowdown could potentially impact discretionary spending on furniture. Wayfair was expectedly more cautious in describing risks around suppliers in its 10-K annual report.

"As an example, the recent outbreak of the novel coronavirus (COVID-19) in China could adversely impact supplier facilities and operations due to extended holidays, factory closures and risks of labor shortages, among other things, which may materially and adversely affect our business, financial condition and results of operations," the company warned.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wayfair Inc. Stock Quote
Wayfair Inc.
W
$59.35 (9.58%) $5.19

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.