Online home furnishing company wayfel The company’s sales fell in the fiscal second quarter, and its chief executive called the current slowdown in the home furnishings category “unprecedented” and likened it to the 2008 financial crisis.
“Our credit card data shows that category adjustments now reflect the magnitude of the peak-to-trough decline experienced by the home furnishings industry during the financial crisis,” Wayfair CEO Niraj Shah said in the release. “Customers remain cautious in spending on home purchases. “
The e-tailer’s revenue and profit missed Wall Street expectations. Shares opened down about 8% before recovering some of their losses.
Here’s how Wayfair’s fiscal second-quarter performance compared to Wall Street expectations, according to an LSEG survey of analysts:
- Earnings per share: Adjusted 47 cents, expected 49 cents
- income: $3.12 billion vs. $3.18 billion expected
The company reported a loss of $42 million, or 34 cents per share, in the three months ended June 30. good.
Sales fell to $3.12 billion, down about 2% from $3.17 billion a year earlier. The company’s sales slowed even as average order value rose to $307 from $313 in the quarter. Open the first large store.
Wayfair expects revenue to drop to the low single digits this quarter, compared with expected growth of 1.7%, according to LSEG.
For more than a year, home furnishings companies like Wayfair have seen weak demand for items like new sofas and dining sets as the overall housing market stagnates under the influence of high interest rates. Consumers are buying fewer new homes, which means they have fewer reasons to buy new furniture. Additionally, with stubborn inflation, they are more picky about how they spend their discretionary income, and home goods are less of a priority when it comes to choices like restaurants, new clothes and travel.
Wayfair needs discounts to attract customers, and it doesn’t expect the category to recover until interest rates fall and the housing market rebounds.
“The declines we’re seeing are similar to the declines we saw between 2008 and 2010, which I think is an indication that the category has just gone through a massive correction, whereas we’ve only had GDP recessions before,” Kate Gulliver, Wayfair’s chief financial officer, told CNBC. express.
“Obviously, technically we as a country are not in a GDP recession right now, so that’s somewhat unique to this category… We’ve seen recession-like corrections in this category over the past few years. ”
In a conference call with analysts, Shah called the slowdown in the home furnishings category “unprecedented” and said it was similar to what happened in the space during the financial crisis.
“Our credit card data shows the category is down nearly 25% from its peak in the fourth quarter of 2021,” Shah said. “Importantly, this calculation is on a nominal dollar basis and adjusting for inflation shows we are now We are in the midst of a correction of over 35%, which is an unprecedented level of correction for our industry.”
Fed Chairman Powell says reprieve could come soon Interest rate cuts may be coming As long as economic data continues on its current trajectory, it could be released as soon as September.
“Given how well we understand this cycle, you can expect a turnaround to come soon, and Wayfair is well-positioned to benefit from it,” Shah said.
Wayfair implemented A series of massive layoffs Shah said the company has struggled to become profitable in order to bring its cost structure in line with the current scale of the business, but this quarter was its best for free cash flow generation and adjusted EBITDA in three years.
The company’s adjusted EBITDA for the quarter was $163 million, still below Wall Street expectations of $168 million, according to StreetAccount.
Shah said: “While revenue remains challenging, we operate the business with the goal of achieving substantial growth in profitability this year. This will also be our mindset every year going forward.”
