Wednesday morning brought more cautious optimism into the stock market, as Wall Street investors have generally been increasingly comfortable with the way the U.S. economy is behaving. Despite multiple calls for a recession, most measures of economic growth have held firm thus far. That had stock index futures rising slightly early Wednesday, maintaining the considerable upward momentum that has taken key benchmarks to their best levels in a year.
Of particular note, consumer discretionary stocks appear to be taking up the slack after performing poorly during much of 2022. If people feel more comfortable spending on discretionary purchases, it indicates their confidence that their personal financial prospects are more secure. That sentiment was a vital part of why shares of Wayfair (W -3.04%) and Lovesac (LOVE -1.63%) were on the rise early Wednesday. Here are the details.
Wayfair sees a brighter future
Shares of Wayfair rose more than 5% in premarket trading on Wednesday morning. The online home furnishings company offered investors a business update that took a positive tack on how things are going.
Wayfair didn't offer a huge number of details in its brief update, but it indicated that its gross revenue trends have been strengthening throughout the second quarter. The e-commerce furniture company doesn't expect that the boost will be enough to surpass its sales results from the same period last year, but it does believe that declines in revenue should be limited to mid-single-digit percentages.
To be clear, Wayfair hasn't seen a complete turnaround yet. The company said it's still seeing lower average order values compared to year-ago levels. Interestingly, Wayfair also cited deflationary pressures as having an impact. Yet co-founder/CEO Niraj Shah pointed to total order flow turning positive during the period as a key milestone in the economy's recovery.
Wayfair's announcement came as Steve Oblak, the company's chief commercial officer, announced his retirement, which will take effect at the beginning of 2024. For now, though, investors seem heartened by the idea that things are looking up for the furniture industry even under difficult economic conditions.
Lovesac cozies up to investors
Shares of Lovesac were also up, rising 4% in premarket trading. The maker of adaptable home furnishings reported fiscal first-quarter financial results for the period ended April 30, and investors generally liked what they saw in light of the challenges the company has faced lately.
Lovesac saw reasonable gains in its quarterly sales but faced some pressure on the bottom line. Revenue of $141 million rose 9% year over year. Comparable sales were up more than 15%, as comps at its showroom locations were up 8.4% and internet sales jumped almost 29% from year-ago levels. The company retrenched and closed some of its store locations. However, a rise of more than 20% in total operating expenses caused Lovesac to post a net loss, working out to $0.28 per share and reversing the profit in the year-ago period.
CEO Shawn Nelson was pleased with the results, particularly in light of macroeconomic conditions. Nelson said that consumer spending remains weaker than usual, and higher interest rates have had an impact on the business as well. Yet despite expecting those poor economic conditions to persist, Lovesac's lack of debt and business discipline should pay off in the long run.
In that light, Lovesac affirmed its previous guidance for revenue of $700 million to $740 million for the full year, with expected earnings of $1.83 to $2.24 per share. That confidence passed through to shareholders, and it implies a modest valuation for the stock that could rise if things go well in the future.
