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Wayfair Q2 Earnings: 5 Stand-Out Numbers

By Demitri Kalogeropoulos – Aug 11, 2021 at 9:04AM

Key Points

  • Wayfair's sales volumes are strong, and customer engagement is up.
  • Profitability could keep rising over the next few years.
  • Investors should see increasing returns as Wayfair works towards its long-term goal of over $100 billion in annual sales.

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Here are a few big highlights from a stellar second-quarter earnings report.

Wall Street found good reasons to be thrilled with Wayfair's (W 3.79%) recent earnings report, which showed continued strong growth momentum even as the pandemic-related surge retreats. The online retailer is building a large base of loyal shoppers who appear to be staying engaged with its platform.

Earnings and cash flow are spiking thanks to the combination of that growth plus rising profit margin. But there are a few numbers that highlight the bullish growth story even better than the 20% year-over-year increase in active customers.

Let's look at five of the biggest.

Person sitting on a couch with an open laptop and a credit card in their hand.

Image source: Getty Images.

1. Repeat orders: 76% of total volume

Wayfair posted lower revenue, as expected, due to the tough comparison with soaring results in the year-ago period. But looking beneath that headline figure reveals strong underlying growth trends. Annual revenue in the past 12 months hit $14.8 billion compared to just $9 billion in 2019 before the pandemic struck.

Wayfair's newest customers are staying engaged with the brand, too. Repeat order volume was 76% of the total compared to 67% a year ago. "The home remains a high priority for our customers," CEO Niraj Shah said in a press release.

2. Gross profit: 29% of sales

Wayfair's efficiency metrics are still impressive despite rising supply chain and labor costs. Gross profit landed at 29% of sales in Q2 to stay even with fiscal 2020's banner result. Management had been aiming for profitability of between 25% and 27% before, but now that metric seems likely to be closer to 30% over the long term.

3. Higher spending: $278 per order

Shoppers aren't just ordering more often; they're also spending more per order. Average order value hit $278 this quarter compared to $227 a year ago. That shows Wayfair is having no trouble passing along higher prices. It also reflects the company's success at pushing into more premium categories, such as bathroom vanities and other bulky home upgrades.

4. Advertising spending: 9.1% of sales

Wayfair didn't have to spend lots of money to encourage its shoppers to visit its platform. Advertising costs were just 9.1% of sales compared to 10% in fiscal Q2 2020.

While that figure might bounce around from quarter to quarter, it's a positive sign that it's trending toward management's long-term goal of between 6% and 8% of sales. Restrained advertising spending is evidence of a strong competitive moat and is a testament to Wayfair's inventory-light operating model.

5. The long-term sales target: $112 billion

Wayfair executives still believe they have a good shot at building a business with over $100 billion in annual sales by 2030 (compared to $14 billion last year). The online home furnishings category should grow at a faster pace than in-store retailing over that time, and Wayfair has demonstrated a knack for gaining market share in that expanding niche.

In the earnings conference call, management cautioned that COVID-19 is adding more risk to the short-term demand outlook but said the big-picture growth story is bright thanks to the shift toward online spending, Wayfair's expanding economies of scale, and its improving fulfillment and shopping platforms.

"Longer-term tailwinds to online category growth are firmly in place," Shah said. Wayfair should win more than its fair share of that growth if it keeps satisfying customers the way it has through the first half of 2021.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Wayfair. The Motley Fool has a disclosure policy.

Stocks Mentioned

Wayfair Stock Quote
Wayfair
W
$36.96 (3.79%) $1.35

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