- Wayfair on Thursday reported fourth quarter net revenue fell 11.4% year over year to $3.3 billion, while U.S. net revenue decreased 8.8% to $2.7 billion. Compared to 2019, however, net revenue increased 28.4%.
- The retailer swung to a loss from a profit a year ago, posting a $196 million operating loss and $202 million net loss during the quarter, according to a company press release. Active customers fell 12.5% from last year to 27.3 million.
- For the full year, the retailer reported net revenue fell 3.1% to $13.7 billion, while U.S. revenue fell 5.5% to $11.2 billion. Operating loss and net loss widened to $94 million and $131 million, respectively.
At the onset of the pandemic, Wayfair was well positioned to benefit from changing consumer trends. The retailer operated both online, where consumers gravitated toward to mitigate potential health risks involved with in-person shopping, and in a category in high demand.
Wayfair over the past year or so has seen its sales and customer base grow tremendously. But as the economy largely opened back up, even with new variants of the coronavirus emerging, online retailers like Wayfair are feeling the pressure.
While demand for home goods has come down from pandemic highs, consumers are still spending. During the period covered by Wayfair's fourth quarter, U.S. consumers spent 13.9% more on home furnishings than they did in the year-ago period, according to GlobalData.
"[A] fair slice of the customers and orders [Wayfair] has picked up during the pandemic came from people who were 'forced' to shop online because of health concerns about using physical stores," GlobalData Managing Director Neil Saunders said in emailed comments. "As the pandemic has abated, these people have migrated back to in-person shopping — something that remains very important in the furnishings sector where people often like to see and feel products before buying."
Wayfair is not alone in feeling the effects of consumers reverting back to physical channels. Overstock, which also operates primarily online, on Wednesday reported fourth quarter net revenue fell 9% year over year to $613 million.
"The danger is that if Wayfair is not building additional spend during a period of very robust demand, the prospects of it adding additional sales as we move into a period of more subdued consumer activity are very slim," Saunders said, adding that in January, consumer spending on the home grew by just 1.9%.
Revenue declines will likely further exacerbate struggles Wayfair has long faced around its lack of profitability. Despite a blip in the black this past year as consumers organically sought out online retailers for home goods, the retailer has fallen back into its pattern of losses. A large contributor to its losses has been the high advertising costs associated with acquiring customers. In its fourth quarter, Wayfair reported advertising expenses reached $345 million, down slightly from last year's $374 million, but representing a larger percentage of total revenue at 10.6%.
To help bring down digital advertising costs, DTC brands have turned to physical retail, through pop-ups, permanent locations or partnerships with traditional retailers. Wayfair itself, which first tested brick and mortar back in 2018, announced plans in December to open three stores in 2022 for its Joss & Main and AllModern brands. The stores, the retailer said, are the first in a series of planned openings over the next two years.
"There is no denying that Wayfair has become a significant force in the home furnishings market, nor that it coped very well during the pandemic," Saunders said. "However, on the fundamental question of whether its business model works, it still has a lot to prove."