Wayfair (NYSE:W) Reports Q1 In Line With Expectations But Stock Drops

Adam Hejl /
2022/05/05 7:25 am EDT
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Online home goods retailer Wayfair (NYSE: W) reported results in line with analyst expectations in Q1 FY2022 quarter, with revenue down 13.9% year on year to $2.99 billion. Wayfair made a GAAP loss of $319 million, down on its profit of $18.2 million, in the same quarter last year.

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Wayfair (W) Q1 FY2022 Highlights:

  • Revenue: $2.99 billion vs analyst estimates of $2.98 billion (small beat)
  • EPS (non-GAAP): -$1.96 vs analyst estimates of -$1.53
  • Free cash flow was negative $331 million, down from positive free cash flow of $15 million in previous quarter
  • Gross Margin (GAAP): 26.8%, down from 28.8% same quarter last year
  • Trailing 12 Months Active Customers: 25.4 million, down 7.8 million year on year

“While multiple macro cross-currents are filtering through the global economy, consumer health remains relatively strong. Shoppers are still very interested in the home category -- as evidenced by our most successful Way Day event ever last week, which included two of the four largest days in Wayfair’s entire history,” said Niraj Shah, CEO, co-founder and co-chairman, Wayfair.

Launched in 2002 by founder Niraj Shah, Wayfair (NYSE: W) is a leading online retailer for mass market home goods in the US, UK, Canada, and Germany.

Consumers ever rising demand for convenience, selection, and speed are secular engines underpinning ecommerce adoption. For years prior to Covid, ecommerce penetration as a percentage of overall retail would grow 1-2% annually, but in 2020 adoption accelerated by 5%, reaching 25%, as increased emphasis on convenience drove consumers to structurally buy more online. The surge in buying caused many online retailers to rapidly grow their logistics infrastructures, preparing them for further growth in the years ahead as consumer shopping habits continue to shift online.

Sales Growth

Wayfair's revenue growth over the last three years has been strong, averaging 26% annually. The initial impact of the pandemic was positive for Wayfair's revenue, pulling forward sales, but quarterly revenue subsequently normalized, year over year.

Wayfair Total Revenue

This quarter, Wayfair reported a rather lacklustre 13.9% year on year revenue decline, in line with analyst estimates.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 8.86% over the next twelve months.

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Usage Growth

As an online retailer, Wayfair generates revenue growth by growing both the number of buyers, and the average order size.

Over the last two years the number of Wayfair's active buyers, a key usage metric for the company, grew 24.1% annually to 25.4 million users. This is a strong growth for a consumer internet company.

Wayfair Trailing 12 Months Active Customers

Unfortunately, in Q1 the number of active buyers decreased by 7.8 million, a 23.4% drop year on year.

Key Takeaways from Wayfair's Q1 Results

With a market capitalization of $9.52 billion Wayfair is among smaller companies, but its more than $1.2 billion in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We struggled to find many strong positives in these results. On the other hand, there was a decline in number of users and the revenue growth was quite weak. Overall, this quarter's results were not the best we've seen from Wayfair. The company is down 6.93% on the results and currently trades at $84.5 per share.

Wayfair may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.