BOSTON – Wayfair posted second quarter total net revenue of $3.3 billion, which is down 14.9% from the second quarter of 2021.
The company posted gross profit of $896 million or 27.3% of total revenue for the quarter ending June 30. The net loss for the quarter was $378 million compared with a gain of $131 million in the second quarter of 2021.
The news caused Wayfair stock to fall 8.8% during pre-market action on the stock market today.
“During a difficult macroeconomic environment, we remain squarely focused on our customers and our suppliers and on making sure Wayfair is their preferred platform for the home,” said Niraj Shah, CEO co-founder, and co-chairman. “We are tightly controlling our many levers and steering Wayfair in a financially responsible manner through this period.”
Diluted loss per share for the second quarter was $3.59 compared with a gain of $1.14 in the second quarter of 2021. The company said the number of active customers in its direct retail business reached 23.6 million at the end of the second quarter, which is a decrease of 24.1% from the previous year. Repeat customers placed 7.8 million orders in the second quarter of 2022, a decrease of 25.7% from last year.
“Consumers remain engaged and responsive to the right combination of wide selection, great deals, and satisfying service, while suppliers are leaning in with Wayfair, extending us more product and better wholesale costs, while using more of our service offerings,” Shah added.
“Simultaneously, we are actively maneuvering Wayfair to generate cash consistently and to control our own destiny. Underpinning this plan is a broad prioritization exercise intended to balance continued investment in long-term growth while ensuring tight day-to-day execution across a range of macro scenarios.”
On the quarterly earnings call with investors, outgoing CFO Michael Fleisher said, “We now have the opportunity to re-examine everything in our cost structure and become more efficient. We understand our priorities and plan to get people in the right place. Some of our planned initiatives we will push off to the future or cut off completely, and we plan do to that in a thoughtful way.”
Shah added that over the last few weeks, Wayfair has articulated a clear set of goals to the entire organization, which include three key tenets: one, drive cost efficiency; two, deliver best-in-class execution by nailing the basics; three, earn customer and supplier loyalty every day. Through this lens, Shah said Wayfair is making swift decisions prioritizing clearly and looking to drive costs out of every pocket of the business.
Shah said the company’s inventory light model allows it to be more nimble, “We have a platform model unlike a retailer who bought goods. They need to choose between discounting product or taking it out of their margins while we don’t have that issue,” he said on the earnings call.
“We don’t look at total availability; we look at a class of goods,” he added. “The way our pricing is set is that suppliers decide wholesale pricing and reduce prices since they have too much inventory, and we are able to pass that savings along to our consumers. Companies that participate in our CastleGate delivery system also manifest as a lower cost to the end customer. This means customers are getting better value, and our gross margin is rising.”
Across the third quarter so far, Wayfair’s gross revenue is down about 10% year-over-year. “This would indicate a break from the typical seasonal pattern, where Q2 and Q3 are typically similarly sized,” Fleisher said on the call. “Based on the current trend, we would expect Q3 net revenue to be below Q2 levels. Unsurprisingly, we see this weakness being driven by the impact of macroeconomic forces on consumers, and reflected in the growth of our category overall.”
