Wayfair on Thursday reported direct retail net revenue, which consists of sales generated through the company's sites, rose 42.1% year over year to $2.3 billion, reflecting a $690.8 million increase.
However, the home goods company also notched a $181.9 million net loss, up from $100.7 million in the year-ago period, according to a company press release. Wayfair reported negative adjusted EBITDA of $69.9 million, or 3% of total net revenue, from negative $34.8 million a year ago.
The company's active customers in its direct retail business increased 39.1% to 17.8 million. Wayfair's mobile business continues to grow, with the company reporting 53.5% of total orders were placed via mobile devices up from 49.2% in the year-ago period.
While Wayfair, which operates Wayfair, Joss & Main, AllModern, Birch Lane and Perigold, beat Wall Street's revenue estimates of $2.2 billion, its net loss was more than expected. The company posted a net loss of $1.98 per share, surpassing the Zacks Consensus Estimate of a loss of $1.36 per share.
The whopping $181.9 million loss also "means that for every order placed, the company is making a loss of $19.71. In our view, this is far from sustainable and raises questions about the long-term viability of the business," according to GlobalData Retail Managing Director Neil Saunders.
Additionally, he said that the company's advertising costs are "out of control" noting that Wayfair spent over a quarter of a billion dollars on advertising in the past quarter alone. While Wayfair did open several pop-ups on Thursday — in Tysons, Virginia; Schaumburg, Illinois; King of Prussia, Pennsylvania; and Durham, North Carolina, which will run through Oct. 31 — the company largely operates online.
Not only is the cost of online acquisition high, but staying top of mind to customers is difficult when selling products that are purchased infrequently. The high advertising expense "completely erodes the already wafer-thin margins and pushes the company deep into the red," Saunders said.
Beyond its finances, the company last month faced additional problems when its workers planned a walkout at its Boston headquarters after executives allegedly rejected a worker request to end business with contractors associated with the U.S.-government operated migrant border camps.