Wayfair's Q1 2023 loss is better than expected, but the outlook remains uncertain

It is learned that on May 4, American home furnishing retailer Wayfair released its first quarter financial report. Data showed that Wayfair's net income in the first quarter fell 7.3% year-on-year to US$2.8 billion, of which US business revenue fell 5% year-on-year to US$2.4 billion, and international business revenue fell 20.4% to US$359 million.

In addition, Wayfair's adjusted EBITDA in the first quarter was a loss of $14 million, a significant improvement from the loss of $113 million a year ago. However, Wayfair's operating losses and net losses widened, with operating losses increasing 11.9% from last year to $347 million, while net losses increased 11.3% to $355 million.

The financial report shows that Wayfair's active users and orders continued to decline in the first quarter, as follows:

1. As of March 31, 2023, the total number of active customers was 21.7 million, a decrease of 400,000 from the same period last year, a year-on-year decrease of 14.6%.

2. LTM net revenue per active customer was $552 as of March 31, 2023, up 6.2% year-over-year

3. The number of orders per customer (calculated as LTM orders divided by active customers) was 1.81 in Q1 2023, compared to 1.87 in Q1 2022

4. 9.7 million orders were delivered in the first quarter of 2023, down 6.7% year-on-year

5. Repeat customers accounted for 79.1% of total orders delivered in the first quarter of 2023, compared to 77.7% in the first quarter of 2022

6. In the first quarter of 2023, repeat customers placed 7.6 million orders, a year-on-year decrease of 6.2%.

7. Average order value for both Q1 2023 and Q1 2022 is $287

8. In the first quarter of 2023, 62.1% of total delivery orders were placed via mobile devices, compared to 59.4% in the first quarter of 2022

Although revenue and active customers continued to decline in the first quarter, Wayfair executives said the company is on its way to profitability. Wayfair Chief Financial Officer Kate Gulliver said on a conference call that it expects to achieve positive EBITDA as early as the second quarter.

Wayfair has been taking steps to reduce costs, including implementing layoffs. The company announced in January that it would lay off nearly 2,000 employees, or 10% of its global workforce. Prior to this, a previous round of layoffs in August affected 870 employees, or 10% of its total corporate workforce.

At the beginning of the epidemic, Wayfair benefited from the online home furnishing consumption boom. But as the epidemic faded and consumer spending shifted to other areas, the decline in demand for home furnishings was particularly evident online.

Wayfair has also begun to expand into physical retail in recent years as the costs associated with online customer acquisition have become increasingly high. Wayfair executives said they see potential in expanding its physical footprint in the future and plan to open a larger Wayfair store in the spring of 2024.

While Wayfair has opened several stores in recent years, the bulk of its business still takes place online.

Wayfair's outlook doesn't look so promising given that it's weighed down by debt and dysfunctional deals and balance sheets. While it has been able to maintain much of the sales growth it achieved during the peak of the pandemic, competition is heating up. IKEA announced late last month that it will invest $2.2 billion over the next three years to drive its omnichannel growth strategy in the United States.

Editor✎ Ashley/

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