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Wayfair (W) Q2 Loss Wider Than Anticipated, Revenues Beat

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Wayfair Inc. (W - Free Report) reported non-GAAP loss of 77 cents per share in the second quarter of 2018, wider than the Zacks Consensus Estimate of 72 cents. The company had incurred a loss 77 cents in the last reported quarter.

Total revenues were $1.66 billion in the second quarter, up 47% year over year. The figure marginally outpaced the Zacks Consensus Estimate of $1.6 billion.

The year-over-year increase in revenues was driven by strengthening of the direct retail business across the United States and international regions.

Following the company’s earnings release on Aug 2, its shares declined 1%. However, Wayfair’s shares have returned 42% over a year, outperforming the industry’s rally of 38.2%.

 

Quarter in Detail

The company’s direct retail net revenues, which include sales generated primarily through Wayfair’s sites, were $1.6 billion in the second quarter, increasing 48.8% year over year.

Active customers increased 34% to 12.8 million. Also, LTM net revenues per active customer increased 9.5% to $440 million.

Wayfair’s total number of orders delivered in the reported quarter came in at 6.5 million, up 50.8% year over year. Orders per customer in the quarter were 1.82 million, reflecting an increase of 5% from the year-ago quarter. Further, repeat customers placed 4.3 million orders in the second quarter, up 62.3% year over year.

Operating Results

In the second quarter, Wayfair’s gross margin was 23.5%, up 40 basis points on a sequential basis.

Adjusted EBITDA margin was (2.1%) million compared with (0.2%) in the year-ago quarter. This was led by increasing investments, mainly in the international regions.

Wayfair’s operating expenses of $480.3 million increased 57% year over year. Operating loss came in at $95.3 million, which was wider than the prior-year quarter’s $37.6 million.

Balance Sheet & Cash Flow

As of Jun 30, 2018, cash, cash equivalents and short-term investments were $575.4 million, down from $582.1 million in the first quarter. Accounts receivables were $34.8 million, up from $31.9 million in the last reported quarter.

Cash from operations was $48 million in the second quarter and capital expenditure was $56 million. Free cash flow was ($7.5) million compared with ($47.6) million in the last reported quarter.

Guidance

For the third quarter of 2018, Wayfair anticipates total revenues in the range of $1.623-$1.662 billion. The Zacks Consensus Estimate for revenues is currently pegged at $1.65 billion.

The company expects direct retail revenues in the range of $1.61-$1.645 billion, reflecting year-over-year growth of 36-39%. This includes expected growth in U.S. direct retail revenues of 34-36% and international segment sales between 50% and 60%.

Further, other revenues are expected between $13 million and $17 million.

Wayfair Inc. Price, Consensus and EPS Surprise

 

Wayfair Inc. Price, Consensus and EPS Surprise | Wayfair Inc. Quote

Zacks Rank and Stocks to Consider

Wayfair currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry include Expedia Group, Inc. (EXPE - Free Report) , Infineon Technologies AG (IFNNY - Free Report) and Rambus Inc. (RMBS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Expedia, Infineon Technologies and Rambus is currently projected to be 16.1%, 6.1% and 10%, respectively.

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