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Wayfair’s sales rose 9.7% in the third quarter as the home-goods retailer delivered more orders and returned to a profit, even while management described the wider U.S. category as roughly flat. Shares were down 1.19% at $110 in premarket trading at 7:31 a.m. Eastern, according to Nasdaq.
The company reported revenue of $3.42 billion and adjusted earnings of 93 cents a share in its earnings release Wednesday. Both beat the LSEG analyst survey cited by CNBC, which called for revenue of $3.38 billion and adjusted earnings of 79 cents a share.
For households shopping for a sofa or dining table, the useful signal is that Wayfair is selling more orders without a higher average bill. For furniture suppliers and competing stores, it is evidence of growth at one retailer, not proof that the whole furniture market has recovered.
More orders, smaller average baskets
Wayfair delivered 11 million orders, up 12.2% from a year earlier. Average order value fell to $311 from $317. That measure reflects the mix of products, promotions and buying behavior; it does not by itself establish that prices fell on the same furniture items.
Active customers rose 4.7% to 22.2 million. Wayfair defines an active customer as someone who bought directly from its sites at least once during the preceding 12 months. Repeat customers accounted for 80% of quarterly orders, compared with 80.1% a year earlier.
U.S. revenue increased 11.4% to about $3 billion, while international revenue fell 2.3% to $380 million. Chief Executive Niraj Shah said U.S. growth came against a “roughly flat category” and described the result as market-share gains. That is management’s assessment of its position, not an independent finding that demand across the industry has improved.
A return to profit, with a comparison worth noting
Wayfair earned $62 million, or 45 cents a diluted share, compared with a loss of $99 million, or 76 cents a share, a year earlier. The earlier quarter included a $99 million loss on debt extinguishment, so the year-over-year swing is not solely a measure of better furniture sales.
Operating income rose to $106 million from $38 million. Adjusted EBITDA, a profit measure that excludes interest, taxes, depreciation and certain other costs, increased to $236 million from $208 million. Operating cash flow rose to $198 million, and free cash flow increased to $136 million from $93 million.
The company ended September with $1.1 billion in cash, cash equivalents and short-term investments, and $1.5 billion in total liquidity including available revolving credit. Long-term debt stood at $2.57 billion, down from $3.23 billion at the end of December.
The holiday test comes next
Finance chief Kate Gulliver told CNBC that promotional activity remains similar to last year’s as the company heads into the holiday season. She pointed to customer loyalty, new stores, the luxury business and value offers as contributors to Wayfair’s momentum.
Investors will be watching whether higher order volume keeps translating into profit when customers are spending less per order. Wayfair’s conference call is scheduled for 8 a.m. Eastern Wednesday. Its early share decline had narrowed from roughly 3% in a 7:13 a.m. Investing.com report; premarket prices can move quickly before the 9:30 a.m. opening.
JBizNews Desk | New York
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