Online home furnishing retailer Wayfair saw shares fall 9.4% in premarket trading on Tuesday after it reported a wider-than-expected second quarter loss. The company reported a net loss of $48.27 million for the quarter, or 57 cents per share, compared to a $19.33 million, or 23 cents per share loss in the year-ago quarter. Adjusted losses were 43 cents per share, missing the FactSet consensus estimate of a loss of 40 cents per share.
Wayfair's total net revenue for the quarter was $786.93 million, up from $491.75 million for the same period last year, beating the FactSet $782 million quarterly revenue consensus estimate. Direct retail revenue, consisting of sales generated primarily through Wayfair’s five brands, surged from $315.4 million to $755.7 million, up 71.6% year over year.
Wayfair reported that active customers in its Direct Retail business reached 6.7 million as of June 30, an increase of 65% year over year. Repeat customers are also up, the company said, and now place 57.6% of total orders, representing growth of 52.1% year over year.
Wayfair, whose furnishings and home goods brands include its flagship Wayfair site, Joss & Main, Dwell Studio, All+ Modern and Birch Lane, has generally enjoyed kudos from Wall Street, but its pure-play e-commerce approach may be reaching its limit.
Huge valuations of pure-play retail ventures like now-floundering flash sales sites are not panning out, just as many e-commerce ventures of the dot-com boom failed, according to a report earlier this year from L2. “The same challenges that plagued Pets.com and others persist two decades later: unsustainable customer acquisition and shipping costs, and a discount-driven environment that erodes already razor-thin margins," the report states. "Hitting 'scale' requires cheap capital to fund growth, in the absence of profitability.”
Wayfair has long enjoyed a stellar repeat-customer record through its proprietary data analytics platform, which fosters a personalized online shopping experience, and that metric rose again in the second quarter. But the company is also revealing vulnerabilities, reflected in its wider-than-expected loss, and “unimpressive growth in net income, poor profit margins, weak operating cash flow and feeble growth in its earnings per share,” according to TheStreet.
Wayfair CEO, co-founder and co-chairman Niraj Shah kept his emphasis on the positive metrics and the company’s tech prowess, saying they is evidence of the retail company’s “rapid growth.” He said in a statement that he sees strong momentum across the business in the U.S. "We are leveraging our expertise in technology and data across all areas of the business with a strategic focus on the expansion and optimization of our warehousing, transportation and logistics infrastructure,” Shah said.