What happened
Shares of Wayfair (W +1.47%) fell Thursday morning after the home-furnishings e-commerce company posted its fourth-quarter earnings report, but were back in the green by the afternoon.
As of 2:41 p.m. ET, Wayfair was up by 3.9% as tech stocks rallied later in the session. Investors seemed to spy buying opportunities after the market opened sharply lower on news of Russia's invasion of Ukraine.
Image source: Getty Images.
So what
Wayfair's revenue continued to decline on a year-over-year basis as it lapped the sales boom it experienced during the first year of the pandemic, when Americans were adapting to work-from-home and learn-from-home conditions.
Revenue in the fourth quarter slipped by 11% to $3.25 billion, which matched analysts' consensus expectation. Orders delivered fell by 26.7% to 12.1 million, though the share of orders from repeat customers increased from 72.5% in 2020's Q4 to 76.3% in 2021's Q4, showing that the platform is retaining repeat buyers.
NYSE: W
Key Data Points
On the bottom line, the company finished the quarter with an adjusted EBITDA loss of $4 million, compared to a profit of $263 million in the year-ago quarter, as fixed costs deleveraged and its gross margin fell from 29% to 27.1%. It also went from an adjusted profit of $1.24 per share in the year-ago quarter to a loss of $0.92 per share, underperforming analysts' expectations for a loss of $0.69 per share.
While those figures were underwhelming, CEO Niraj Shah did note that the company's revenue had grown by more than 50% over the last two years, and offered this upbeat assessment: "While consumer behavior has changed repeatedly throughout the pandemic, the primary elements for success in our category have not -- the home remains top of mind and secular trends favor a long and durable shift to e-commerce. Wayfair has only just begun to scratch the surface of this vast opportunity."
Now what
The company didn't give specific guidance for the current quarter or for the rest of 2022, but said that it expects to be modestly profitable on an EBITDA basis for the year. Quarter to date, revenue is down by a percentage in the low teens, but that should begin to inflect in the second quarter, when the company will face easier year-over-year comparisons as online shopping slowed in 2021 once COVID-19 vaccines became more widely available. Wayfair expects its second-quarter revenue to be better than in the first quarter, and said it's targeting sustainable gross margins of 27% to 28%, in line with its Q4 performance.
While the company should return to revenue growth later this year, there are fair questions about its ability to be meaningfully profitable as it's now 20 years old. The stock has pulled back significantly from its peak last year, but both the ongoing reopening of the economy and persistent supply chain constraints could pose a challenge to Wayfair this year.
