by Company still reports a net loss of $355 million despite extensive cost-cutting measures
BOSTON, Mass. — Wayfair Inc.’s latest results show that a turnaround to profitability won’t come as easily or quickly as investors would like despite its most well-intentioned efforts.
Recall how the company has already taken major steps to cut costs, both through staff reductions and other initiatives, including how it negotiates anything from insurance policies to software licenses and other third-party services and operational costs. These types of savings were to continue throughout the year and help the company return to profitability, noted Niraj Shah, company co-founder and co-chairman, earlier this year,.
Yet the company’s first quarter ended March 31 showed that such efforts could take longer than anticipated to show any tangible results.
As many know, the path to increased sales and profitability is as uneven as ever particularly in challenging economic times. For many, it’s also occurring as the industry comes off the breakneck pace of business the past 18 months to more normal pre-pandemic levels.
Here are some highlights of Wayfair’s latest report that show where it stands in the current environment.
Total net revenues of $2.8 billion were down 7.3% for the quarter, a decrease of $219 million from last year at this time. U.S. net revenues of $2.4 billion were down 5% year over year, a decrease of $127 million, while international net revenues of $359 million were down 20.4%, a decrease of $92 million.
The company also reported a net loss of $355 million, or $3.22 per share, compared to a net loss of $319 million, or $3.04 per share the same period last year.
But there were some positives in the report, which indicate the company is at least headed in the right direction.
+ Gross profits of $821 million were 29.6% of total net revenues compared to gross profits of $803 million, or 26.8% of net revenues the same period last year.
+ EBITA was a negative $14 million, down significantly from the negative $113 million reported last year.
+ The company also said that revenues over the past 12 months per active customer were $552 as of March 31, up 6.2% year over year.
+ Repeat customers placed 79.1% of total orders delivered in the first quarter compared to 77.7% in the same period last year
+ The average order value stayed the same at $287 in both the first quarter of 2023 and 2022.
+ It also reported cash and cash equivalents of $1 billion and total liquidity of $1.6 billion, including funds available through its revolving credit facility.
Shah described this as a strong quarter for the company as “we are pleased to be seeing consistent market share gains and a significant improvement in cost structure versus last quarter that gets us to nearly adjusted EBITDA breakeven in Q1,” he said in a statement, adding that it expects to have a positive adjusted EBITDA in the second quarter. “We have always known and we are clearly demonstrating that the Wayfair model is inherently profitable and there is considerable opportunity for us to rapidly drive further margin expansion.”
He noted the company shared this roadmap laying out its path to profitability about nine months ago and that “we have been executing against that plan.”
“Through a focus on our three core initiatives of driving customer and supplier loyalty, nailing the basics and cost efficiency, we have made significant strides in improving our offering and customer experience, simultaneously reducing our cost structure while investing for future growth,” he said.
Obviously Shah and others feel good about the direction the company is headed. Its stock price, for example, was up 15.76% Thursday after the market close, the same day the results came out.
But realize too there are other headwinds as the economy may not be getting much better for some of Wayfair’s customers anytime soon. Note how orders delivered in the first quarter were down 6.7% and that the number of active customers was down 14.6% to 21.7 million. These are areas the company will likely be addressing as well through increased marketing efforts, which of course are part of overall costs.
Plus there’s still that nagging net loss of the $355 million, not to mention the company’s long-term debt of $3.1 billion, part of its total $5.9 billion in liabilities
Thus upcoming quarters will be worth watching as they will show the marketplace whether the company’s cost-cutting strategies indeed reverse its fortunes.
s
