What happened
Shares of Wayfair (W 3.30%) were falling last month as the online home goods retailer issued a disappointing first-quarter earnings report and fell on broad-market weakness.
According to data from S&P Global Market Intelligence, the stock lost 23% last month. As you can see from the chart below, most of the slide came in the first half of the month after its earnings report came out.
So what
Wayfair plunged 26% on May 5 after the company released its first-quarter results. Overall revenue in the quarter fell 13.9% to $3 billion as the company continued to face difficult comparisons with the economic reopening as spending has shifted away from online channels and from categories like home goods. The top-line result matched estimates.
Image source: Getty Images.
Other metrics also indicated a slowdown in traffic as active customers fell 23.4% to 25.4 million over the last year, and orders delivered were down 29% to 10.4 million.
On the bottom line, the company posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $113 million and an adjusted loss per share of $1.96, which was much worse than a per-share profit of $1.00 in the quarter a year ago, and below estimates at a per-share loss of $1.59.
NYSE: W
Key Data Points
Management declined to provide guidance, citing macroeconomic uncertainty but said it expected revenue growth to accelerate over the year as comparisons get easier. It also reiterated a goal of returning to adjusted EBITDA profitability though it would not say if it would do so for the full year.
Wayfair was one of several e-commerce stocks to fall sharply on its earnings report as the entire sector was up against difficult comparisons and is struggling with challenges related to inflation and consumer spending shifting back to services like travel.
Over the rest of the month, Wayfair limped along as analysts weighed in with mostly negative commentary, and the company also announced a hiring freeze for 90 days. Toward the end of the month, the stock got a tailwind from a recovery in the broad market.
Now what
Wayfair's growth potential still seems appealing as the company is the clear leader in home goods e-commerce and is expected to generate $13 billion in revenue this year. However, it has struggled to be profitable throughout its 20-year history, and it's clear that the COVID-19 boom is temporary.
While the sell-off could offer a good buying opportunity for long-term investors, Wayfair's performance is likely to be impaired for several more quarters.
