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Wayfair (W) Q3 Loss Wider Than Anticipated, Revenues Beat

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Wayfair Inc. (W - Free Report) reported non-GAAP loss of $1.28 per share in the third quarter of 2018, wider than the Zacks Consensus Estimate of $1.12. The company had incurred a loss of 77 cents in the last reported quarter.

Total revenues were $1.71 billion in the third quarter, up 42% year over year. The figure also outpaced the Zacks Consensus Estimate of $1.67 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, its shares declined 12.8%. However, Wayfair’s shares have returned 19.8% on a year-to-date basis against the industry’s decline of 1.3%.

 

 

Quarter in Detail

The company’s direct retail net revenues, which include sales generated primarily through Wayfair’s sites, were $1.7 billion in the third quarter, increasing 43.3% year over year.

Active customers increased 35% to 13.9 million. Also, LTM net revenues per active customer increased 8.6% year over year to $443 million.

Wayfair’s total number of orders delivered in the reported quarter came in at 6.9 million, up 47% year over year. Orders per customer in the quarter were 1.84 million, reflecting an increase of 5.1% from the year-ago quarter. Further, repeat customers placed 4.6 million orders in the third quarter, up 59.7% year over year.

Operating Results

In the third quarter, Wayfair’s gross margin was 23%, down 40 basis points on a year-over-year basis.

Adjusted EBITDA margin was (4.5%) million compared with (1.9%) in the year-ago quarter. This was led by increasing investments, mainly in the international regions.

Wayfair’s operating expenses of $538 million increased 51.9% year over year. Operating loss came in at $145.3 million, which was wider than the prior-year quarter’s $74 million.

Balance Sheet & Cash Flow

As of Sep 30, 2018, cash, cash equivalents and short-term investments were $518.7 million, down from $575.4 million in the second quarter. Accounts receivables were $41 million, up from $34.8 million in the last reported quarter.

Cash from operations was $7.8 million in the third quarter and capital expenditure totaled $49.4 million. Free cash flow was ($58.8) million compared with ($7.5) million in the last reported quarter.

Guidance

For the fourth quarter of 2018, Wayfair anticipates total revenues in the range of $1.92-$1.968 billion. The Zacks Consensus Estimate for revenues is currently pegged at $1.93 billion.

The company expects direct retail revenues in the range of $1.905-$1.950 billion, reflecting year-over-year growth of 34-37%. This includes expected growth in U.S. direct retail revenues of 32-35% and international segment sales between 50% and 55%.

Further, other revenues are expected between $15 million and $18 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 #3 (Hold). Some better-ranked stocks in the broader technology sector are boohoo group plc (BHOOY - Free Report) , IAC/InterActiveCorp (IAC - Free Report) and AMETEK, Inc. (AME - 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 rate for boohoo group, IAC/InterActiveCorp and AMETEK is currently pegged at 25%, 15% and 10.97%, respectively.

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