Wayfair Inc. (W) Shares Sell off Sharply on Earnings Miss

Shares of Wayfair Inc. (W) were trading down -6.40 or -13.26 percent to $41.85 per share in Tuesday’s premarket after the company announced fiscal second quarter earnings early this morning. The company missed analyst expectations for earnings, but beat the consensus on revenue for the quarter. Wayfair Inc. stock closed at $48.25 per share, up +0.22 or +0.46 percent in Monday’s regular trading session.

Stock Analysis

Founded in 2002 by Niraj Shah and Steve Conin, Boston, Massachusetts based Wayfair Inc. was formerly known as CSN Stores and is an ecommerce company focused mainly on household furnishings, toys, luggage and pet merchandise.
Wayfair Inc. is the largest online only home furnishings retailer and the 33rd largest online retailer in the United States. The company sells its products across five distinct brands: Wayfair.com, AllModern, DwellStudio, Joss & Main, and Birch Lane. Wayfair Inc. has offices and warehouses in the United States, Ireland, Germany and the United Kingdom. The company had its initial public offering in October of 2014 at $29.00 per share.

Wayfair Inc. reported a GAAP net loss of -$48.3 million or -$0.57 per diluted share for its fiscal 2016 second quarter. On a non GAAP basis, the company reported a loss of -$0.43 per share. Second quarter total net revenue came in at $786.9 million, an increase of $315.4 million or +71.6 percent over the previous year’s second quarter.

Gross profit was $188.5 million or +24.0 percent of total revenue. Adjusted EBITDA was a negative -$24.9 million or -3.2 percent of total revenue. Non GAAP free cash flow was a loss of -$19.4 million. The analyst consensus was for the company to report a loss of  -$0.41 per share on revenue of $782.4 million.

Niraj Shah, Chief Executive Officer, co-founder and co-chairman of Wayfair noted in this morning’s press release that, “Our exceptional growth is fueled by a steadfast commitment to exceeding customer expectations through innovation. We are leveraging our expertise in technology and data across all areas of the business with a strategic focus on the expansion and optimization of our warehousing, transportation and logistics infrastructure. As a result of these key initiatives, we are speeding up delivery times and reducing damage rates to make the retail experience for home more seamless and satisfying than ever before for our customers.”

Wayfair reported that the number of active customers in their direct retail business had reached 6.7 million as of June 30th, 2016, an increase of +65 percent from last year’s second quarter. Revenue per active customer over the last twelve months increased to $404, an increase of +13.2 percent year on year.

Orders delivered in the second quarter came to 2.9 million, an increase of +49.6 year on year. The average value of each order increased from $225 in 2015’s second quarter to $258 in the second quarter of the current year. This year’s orders placed from a mobile device came to 38.4 percent of total orders compared to 34.1 percent in last year’s second quarter.

Wayfair stock has been trading at the higher end of its yearly range; however, the company is still showing a negative EPS despite improvements in the number of active customers and revenue reported for the second quarter.

Other News About W

Words of Warning on Wayfair

Article written just before the company released earnings, warning investors on the stock’s downside risk.

Wayfair attracts complex earnings play

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Published on Aug 9, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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