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Wayfair (W) Q2 Loss Wider Than Expected, Revenues Fall Y/Y
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Wayfair (W - Free Report) reported a non-GAAP loss of $1.94 per share in second-quarter 2022, wider than the Zacks Consensus Estimate of a loss of $1.89. The figure compares unfavorably with earnings of $1.89 per share in the prior-year quarter.
Net revenues of $3.28 billion surpassed the Zacks Consensus Estimate of $3.21 billion. However, the figure declined 14.9% year over year.
The top-line decrease was a result of weakening momentum across the United States as well as the international region. Macroeconomic headwinds were concerning. Declining active customers also affected the results.
Quarter in Detail
Net revenues in the United States decreased 9.7% year over year to $2.8 billion. International net revenues decreased 35.7% from the prior-year quarter to $0.5 billion. On a constant-currency basis, international net revenue growth was (34.4)%.
Active customers were down 24.1% year over year to 23.6 million. LTM net revenues per active customer increased 12.3% year over year to $537. The average order value climbed 18.7% year over year to $330.
The total number of orders delivered in the reported quarter was 10 million, down 28.2% year over year. Orders per customer for the quarter were 1.85 million compared with 1.96 million in the year-ago period.
Repeat customers placed 7.8 million orders (accounting for 78.6% of the total orders) in the second quarter, down 25.7% year over year.
Additionally, 59% of the total orders delivered were placed through a mobile device in the reported quarter compared with 59.4% in the year-ago period.
Wayfair’s second-quarter gross margin was 27.3%, contracting 190 basis points on a year-over-year basis.
Adjusted EBITDA was ($108) million versus $311 million in the year-ago quarter.
Customer service and merchant fees increased 11.7% year over year to $162 million. Advertising expenses rose 7.4% from the prior-year quarter to $378 million. Selling, operations, technology, and general and administrative expenses increased 41.9% year over year to $688 million.
Total operating expenses were $1.3 billion, up 29.1% year over year. As a percentage of revenues, the figure jumped to 38.6% from 25.5% in the year-ago quarter.
Wayfair incurred an operating loss of $372 million for the reported quarter against an operating income of $146 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2022, cash, cash equivalents and short-term investments were $1.7 billion, down from $1.9 billion reported on Mar 31, 2022.
Long-term debt at the end of the second quarter was $3.054 billion, which remained flat with the previous quarter.
In the second quarter, net cash used in operations was $115 million, down from $226 million in the prior quarter.
Wayfair generated a free cash flow of ($244) million.
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Wayfair (W) Q2 Loss Wider Than Expected, Revenues Fall Y/Y
Wayfair (W - Free Report) reported a non-GAAP loss of $1.94 per share in second-quarter 2022, wider than the Zacks Consensus Estimate of a loss of $1.89. The figure compares unfavorably with earnings of $1.89 per share in the prior-year quarter.
Net revenues of $3.28 billion surpassed the Zacks Consensus Estimate of $3.21 billion. However, the figure declined 14.9% year over year.
The top-line decrease was a result of weakening momentum across the United States as well as the international region. Macroeconomic headwinds were concerning. Declining active customers also affected the results.
Quarter in Detail
Net revenues in the United States decreased 9.7% year over year to $2.8 billion. International net revenues decreased 35.7% from the prior-year quarter to $0.5 billion. On a constant-currency basis, international net revenue growth was (34.4)%.
Active customers were down 24.1% year over year to 23.6 million. LTM net revenues per active customer increased 12.3% year over year to $537. The average order value climbed 18.7% year over year to $330.
The total number of orders delivered in the reported quarter was 10 million, down 28.2% year over year. Orders per customer for the quarter were 1.85 million compared with 1.96 million in the year-ago period.
Repeat customers placed 7.8 million orders (accounting for 78.6% of the total orders) in the second quarter, down 25.7% year over year.
Additionally, 59% of the total orders delivered were placed through a mobile device in the reported quarter compared with 59.4% in the year-ago period.
Wayfair Inc. Price, Consensus and EPS Surprise
Wayfair Inc. price-consensus-eps-surprise-chart | Wayfair Inc. Quote
Operating Results
Wayfair’s second-quarter gross margin was 27.3%, contracting 190 basis points on a year-over-year basis.
Adjusted EBITDA was ($108) million versus $311 million in the year-ago quarter.
Customer service and merchant fees increased 11.7% year over year to $162 million. Advertising expenses rose 7.4% from the prior-year quarter to $378 million. Selling, operations, technology, and general and administrative expenses increased 41.9% year over year to $688 million.
Total operating expenses were $1.3 billion, up 29.1% year over year. As a percentage of revenues, the figure jumped to 38.6% from 25.5% in the year-ago quarter.
Wayfair incurred an operating loss of $372 million for the reported quarter against an operating income of $146 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2022, cash, cash equivalents and short-term investments were $1.7 billion, down from $1.9 billion reported on Mar 31, 2022.
Long-term debt at the end of the second quarter was $3.054 billion, which remained flat with the previous quarter.
In the second quarter, net cash used in operations was $115 million, down from $226 million in the prior quarter.
Wayfair generated a free cash flow of ($244) million.
Zacks Rank & Stocks to Consider
Wayfair currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the retail-wholesale sector are Dollar General (DG - Free Report) , Costco Wholesale (COST - Free Report) and Dollar Tree (DLTR - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dollar General has gained 6.8% on a year-to-date basis. The long-term earnings growth rate for the DG stock is currently projected at 12.2%.
Costco Wholesale has lost 3.6% on a year-to-date basis. The long-term earnings growth rate for the COST stock is currently projected at 9.2%.
Dollar Tree has returned 17.5% on a year-to-date basis. The long-term earnings growth rate for the DLTR stock is currently projected at 15.5%.