Online furniture retailer Wayfair has posted a solid increase in sales for the second quarter, which was in line with the wider market trend.
The company’s net revenue rose 5 per cent to $3.3 billion during the quarter ended June 30. Excluding the impact of its exit from the German market, revenue increased 6 per cent.
By geography, US sales were up 5.3 per cent to $2.9 billion, and international sales increased 3.1 per cent to $399 million.
According to GlobalData MD Neil Saunders, this is the best growth rate the company has produced since the fourth quarter of 2020. However, revenue is still over half a billion down on the peak second quarter of 2021.
“While pleasing, the growth is very much aligned with wider trends in the market, which saw the whole home furnishings category accelerate over the quarter due to a combination of consumers pulling purchases forward because of tariff concerns and the purchase cycle coming off its nadir,” the analyst elaborated.
Saunders added that the company’s market share was broadly flat over the period, although management claimed that it has made solid gains.
On the bottom line, the company reported a net income of $15 million compared to net loss of $42 million in the year-ago period. At the operating level, profit was $17 million compared to a $35 million loss last year.
Saunders noted that the margin remains slim, but the symbolism of Wayfair turning a profit is significant.
“There is some hope in the fact that Wayfair has been taking costs out of the business and ditching unprofitable ventures like overseas operations.
“However, we still see the model as shaky, and it will take a lot more quarters – through all kinds of trading environments – to convince us that Wayfair has an operation that can generate solid and sustainable returns,” he continued.
The analyst noted that the company’s physical store strategy is promising, with a 140,000sqft store set to open in Denver late next year.
“Although Wayfair remains very embryonic in its store network, we think there is headroom for further expansion. It is also a hedge against the expansionary activity of rivals, such as Ikea and HomeGoods – both of which compete for the same dollar, even though they have somewhat different positions.”
For the first half, the company remained in the red, but net loss narrowed from $290 million last year to $98 million.
Saunders expects demand for home furnishings to tighten in the second half, which will be the “acid test” as to whether Wayfair is becoming a sustainable, profitable business.
