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Wayfair (W) Q1 Earnings Surpass Estimates, Revenues Jump Y/Y

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Wayfair (W - Free Report) reported first-quarter 2021 non-GAAP earnings of $1 per share, which were significantly higher than the Zacks Consensus Estimate of 29 cents. The company had reported loss of $2.30 per share in the year-ago quarter.

Total revenues were $3.48 billion, up 49.2% year over year and ahead of the consensus mark by 2.6%.

The year-over-year increase in revenues was driven by strong acceleration in new and repeat customer orders. Also, increase in active customers and strength in the company's direct retail business aided year-over-year revenue growth.

Top-Line Details

Net revenues in the United States increased 42.8% year over year to $2.83 billion and international net revenues surged 85% to $656.8 million.

Wayfair Inc. Price, Consensus and EPS Surprise

Wayfair Inc. Price, Consensus and EPS Surprise

Wayfair Inc. price-consensus-eps-surprise-chart | Wayfair Inc. Quote

Active customers soared 57.3% year over year to 33.19 million. Moreover, LTM net revenues per active customer increased 2.7% year over year to $453. Average order value climbed 0.9% year over year to $237.

Total number of orders delivered in the reported quarter was 14.7 million, up 48.8% year over year. In addition, orders per customer for the quarter were 1.98 million, compared with 1.86 million in the year-ago quarter.

Further, repeat customers placed 10.9 million orders (74.5% of total orders) in the first quarter, up 58.9% year over year.

Additionally, 60.0% of total orders delivered were placed through a mobile device in the first quarter, compared with 54.8% in the year-ago quarter.

 

Operating Details

Wayfair’s first-quarter gross margin was 28.8%, up 400 basis points on a year-over-year basis, driven by merchandising gains and strength in media supplier services.

Adjusted EBITDA was $205.8 million against the year-ago quarter’s loss of $127.3 million.

Customer service and merchant fees jumped 64.6% year over year to $147.2 million. Advertising expenses surged 32.7% to $365.9 million.

However, selling, operations, technology, general and administrative expenses declined 5.2% year over year to $451.4 million, primarily due to slower rate of hiring.

Consequently, operating income surged from $32 million reported in the year-ago quarter to $115 million in the first quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2021, cash, cash equivalents and short-term investments were $2.70 billion, a slight increase from $2.59 billion reported as of Dec 31, 2020.

Total debt as of Mar 31, 2021, was $3.06 billion compared with $2.66 billion as of Dec 31, 2020.

Moreover, cash from operations was $176.6 million while free cash flow was $111.2 million.

Guidance

Wayfair is expected to face tough year-over-year comparison in the second quarter of 2021. The company’s year-ago quarter’s revenues benefited from significant spike in demand for home offices and play rooms due to the advent of the coronavirus pandemic. Hence, the company believes year-over-year comparison is not meaningful.

Quarter to date, Wayfair has witnessed year-over-year decline trends in revenues. However, the company is satisfied with the sequential growth trend and expects the top line to benefit from a growing number of repeat customers.

Moreover, Wayfair expects gross margin between 27% and 28%.

Further, customer service and merchant fees as percentage of revenues are expected between 3.5% and 4%. Advertising expenses as percentage of revenues are anticipated between 10% and 11%.

Selling, operations, technology, general and administrative expenses are expected to grow sequentially and be between $390 million and $400 million.

Adjusted EBITDA is expected to remain unchanged sequentially.

Wayfair expects to report strong profits in every quarter of 2021. In fact, the company believes that given the growth opportunities, its long-term EBITDA guidance of 8%-10% is too low and no longer appropriate.

Zacks Rank & Stocks to Consider

Wayfair currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader retail sector include American Eagle Outfitters (AEO - Free Report) , Foot Locker (FL - Free Report) and L Brands (LB - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

L Brands, Foot Locker and American Eagle Outfitters and are set to report their earnings results on May 19, 20 and 26, respectively.

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