Can Wayfair Overcome the Post-Pandemic Headwinds?

Wayfair (W 2.14%) was a big winner during the pandemic, but the company is now dealing with the fallout as consumers begin spending more money outside of the home.

In this episode of "Beat and Raise," recorded on Nov. 4, Motley Fool contributors Toby Bordelon and Jason Hall discuss Wayfair's earnings and what's next for the company as it adjusts to the new normal. 

Toby Bordelon: All right, yeah lets look at Wayfair. Wayfair didn't have a great earnings report. I guess I would say. What happened? Revenue was down 18.7 percent Jason.

Jason Hall: Your view is very strange, I'm going to steal the screen share.

Toby Bordelon: My view is strange? You know what let me fix that here.

Jason Hall: There you go. It was doing a landscape or something.

Toby Bordelon: That's weird. Here we go boom. Revenue down 3.1 billion or revenue down at 18.7 percent, 3.1 billion. That was a miss. They beat on earnings-per-share. I guess I would say. You're seeing that screen alright?

Jason Hall: I just shared mine. Yours was coming up keep rolling you're good.

Toby Bordelon: Mine is not working?

Jason Hall: Just roll, we got mine.

Toby Bordelon: That's fine. They beat on the earnings a little bit. It's basically by one penny and what you see there is actually the non-GAAP number on the GAAP number, they beat by one penny. But the big news that revenue miss, which is huge. Operating cash flow also went negative down to minus 100, negative 130, almost 131 million there. Now, there is some good news. Active customers went up 1.5 percent, but orders from repeat customers down almost 26 percent. We're not seeing some awesome stuff here for Wayfair. What is going on? There's two issues that they called out that you might want to consider. They talked about supply chain issues. They're having supply challenges like everyone else has got to get stuff from point A to point B. There might be some issues there. They also said people are shifting their spending to doing more travel and more entertainment coming out of the pandemic, which is what we expected. That is not unexpected. Between those two issues, between supply chain and this new post-pandemic normal in terms of consumer spending, I think it's that shifting consumer spending that will be most concerning for me because they can't do anything about that.

Supply chain issues you can fix. If your issue is on the supply side, you can eventually solve back. What you can't solve is that now I'm just going to take more vacation instead of buying more furniture for my house like that. There's nothing they can do about that. That was something that we have been fearing. I don't want to say fearing, but this has been a concern for a lot of companies.

Jason Hall: Just be conscious of it.

Toby Bordelon: What are we going to spend the money on? Wayfair, I think, is one of the companies we're seeing that hurting them as people shift back to a more normal mix of where you spend your dollars. I'm honestly not sure what the solution is, that's why the stock is down, on this report. I don't really know where they go from here. You can do better. You can get your supply chain fixed. You can start shipping product in. Then they're saying the right things. Its going to take a few quarters to normalize to get us back to normal. But I doubt we're going to see the boost we saw on the pandemic. I doubt we're getting back to a point where people are spending as much on blowing their homes on furniture. If you wanted a home office, do you probably not have one already by now? Why have you not already made that purchase? It's that orders from repeat customers down 26 percent, I think that tells a story. Its furniture, it's not something you buy every six months, right?

Jason Hall: Exactly, it's limited how much you can really count on repeat customers because of the structure of your business. I think something I want to see here before we keep rolling Toby is, I want to see what are some of it's more traditional competitors reporting. What are their results? Because I think that's going to also inform, is the e-commerce model as strong of a durable thing for furniture and home goods as maybe some of us expected. Myself included, I think they proved that it was a great business and we'll find out. We're learning about it.

Toby Bordelon: Let's not have people think that we think Wayfair is a bad business. This is a great company, it's a great business. The issue is that you had this massive boost in the pandemic and we got it, this reset expectations. We got to realize that it's not the only game in town people invest their money elsewhere, potentially, at least some part. They'll figure it out, and they'll get to where they need to be in this post-pandemic world, we're moving into I think.