Wayfair Stock Rose on Strong Q1 Revenue amid COVID-19

Sirisha Bhogaraju - Author

May 5 2020, Published 11:57 a.m. ET

Wayfair (NYSE:W) stock has risen by 25.3% as of 10:25 AM ET today. The company reported strong revenue for the first quarter. The online furniture and home goods retailer also posted a lower-than-expected loss YoY (year-over-year). The first-quarter net revenue rose by 19.8% to $2.33 billion, which beat analysts’ forecast of $2.31 billion.

Aside from Wayfair.com, the company sells its online products on other sites including Joss & Main, AllModern, Birch Lane, and Perigold. Wayfair’s rivals include Amazon, Walmart, Home Depot (NYSE:HD), and Lowe’s.

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Wayfair’s Q1 revenue growth

In an update provided last month, the company disclosed that it experienced a spike in demand amid COVID-19. Notably, stay-at-home restrictions helped the company gain significant online orders for its products. Wayfair’s US revenue grew 19.1% YoY to $1.97 billion in the first quarter. Meanwhile, international revenue rose by 23.7% to $355 million. Excluding the impact of currency fluctuations, international revenue grew 25.5%.

Wayfair delivered 9.9 million orders in the first quarter, which implies a 21% YoY growth. Notably, repeat customers placed 6.9 million orders—up 27.9% YoY. Also, the number of active customers in the company’s direct retail business increased by 28.6% to 21.1 million. Wayfair has been spending significantly on marketing to attract new customers and increase the loyalty of the existing customer base.

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Wayfair’s adjusted net loss per share widened to $2.30 in the first quarter of 2020. The company’s adjusted net loss per share was $1.62 in the first quarter of 2019. However, the company’s adjusted loss per share was better than analysts’ expectation of a loss per share of $2.60. Wayfair’s adjusted EBITDA loss widened to $127.3 million in the first quarter of 2020 compared to a loss of $102.2 million in the first quarter of 2019.

Wayfair’s adjusted EBITDA margin was -5.5% in the first quarter of 2020. The adjusted EBITDA margin was -5.3% in the first quarter of 2019. In last month’s business update, the company indicated that it expects to meet or exceed its first-quarter adjusted EBITDA margin guidance -7.3% to -7.8%.

Will sales momentum continue in Q2?

According to Wayfair, the strong momentum it experienced in the last two weeks of March has continued in the second quarter. The company thinks that COVID-19 has accelerated the adoption of e-commerce in the home category. However, Wayfair didn’t provide any specific growth guidance for the second quarter. The uncertainty associated with COVID-19 makes it difficult to provide a forecast.

The company will implement cost control measures to improve its profitability. In the first quarter, Wayfair’s gross margin expanded by 70 basis points YoY and by 200 basis points sequentially to 24.9%. Wayfair is optimistic that the quarter-to-date performance puts it on the trajectory to deliver a positive adjusted EBITDA margin in the second quarter. The stock has risen 48.4% year-to-date as of May 4.


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