Wayfair’s Sales Soar But Losses Deepen

Sees continued growth in home improvement, housewares and mattresses
March 1, 2017Andrea Lillo

WayfairBOSTON—Wayfair recently reported full year and fourth quarter results, showing sales soaring for both periods, while profits declined considerably.

The etailer’s direct retail net revenue—consisting of sales generated primarily through Wayfair’s five websites—is up 59.7 percent year over year for 2016, increasing by $1.2 billion to rest at $3.3 billion. For 2016, however, the company posted an adjusted EBITDA loss of $88.7 million, or negative 2.6 percent of total net revenue for the year. In 2015, the company posted an adjusted EBITDA loss of nearly $16 billion.

The fourth quarter sales results were also strong, growing 39.9 percent year over year, increasing by $273.4 million to land at $959 million. The fourth quarter also saw an adjusted EBITDA loss of $12 million, or negative 1.2 percent of total net revenue.

In the U.S., Wayfair is investing in its proprietary logistics network, including CastleGate and the Wayfair Delivery Network, as well as in those newer categories, CEO Niraj Shah told analysts during a recent earnings call. “Even with this substantial ongoing investment in our U.S. business, the U.S. business continues to deliver strong results. In 2017, our team will continue to innovate at a rapid speed to deliver on a number of strategic initiatives that will solidly reinforce Wayfair’s leadership position as the best place to shop for home.” He also noted the company’s international investments are starting to pay off in Canada, the United Kingdom and Germany, “where we are starting to see real traction and increased brand awareness.”

Shah also highlighted the growth in some of its newer categories, such as home improvement, housewares and mattresses. “We focus on the items that target our customer; a woman aged 35 to 65 cares about and wants to pick out herself,” he said. Housewares is included in its budding wedding registry offerings; the mattress category “is a good example of a category we historically had on the site, but didn’t merchandize well or provide the right selection.”

“Over the last year, we have started to make those investments and are now using a multi-pronged approach that includes innerspring, foam and bed-in-a-box mattresses across industry leading brands as well as our private label Wayfair suite brand. Though we still have much work to do here and a big opportunity ahead, today the mattress category is an over $100 million annualized run rate category that is growing nicely.”

Following the results, Raymond James downgraded Wayfair shares to Market Perform from Outperform based on slowing U.S. revenue growth (which it estimates at around 24 percent U.S. direct growth this year, versus 54 percent last year), continued EBITDA losses near-term given continued investments in international, new businesses such as registry, categories and logistics, and its belief that shares are fairly valued at current levels, it said. “To become more constructive at current levels, we would look to see stabilizing U.S. Direct growth rates and improved operating leverage,” the firm noted.

Andrea LilloAndrea Lillo | Fashion Editor

Andrea Lillo has written about a variety of topics, from beer gardens in Queens to kitchen design trends to residential caves. Having joined Home Furnishings News in 2006, she serves as Fashion Editor.


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