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

Zacks Equity Research

Wayfair Inc. W reported non-GAAP loss of $2.23 per share in third-quarter 2019, wider than the Zacks Consensus Estimate of a loss of $2.13.

Total third-quarter revenues came in at $2.31billion, up 36% year over year. The figure also outpaced the Zacks Consensus Estimate of $2.28 billion.

The year-over-year increase in revenues was driven by strengthening of the company’s direct retail business across international regions.

Direct retail net revenues from the international segment increased 46% year over year to $339 million (or up 50% on a constant-currency basis).

Although Wayfair has been facing foreign currency translation headwinds, management expects growth to accelerate in the near term due to logistics operations, allowing it to reduce the cost structure.

Quarter in Detail

Direct retail net revenues, which include sales generated primarily through Wayfair’s sites, were $2.3 billion in the third quarter, increasing 35.9% year over year.

Active customers increased 38% from the prior-year quarter to 19.1 million. Also, LTM net revenues per active customer increased 1.4% year over year to $449 million.

Total number of orders delivered in the reported quarter was 9.1 million, up 31.5% year over year. In addition, orders per customer in the quarter were 1.85 million, reflecting an increase of 0.5% from the year-ago period. Further, repeat customers placed 6.1 million orders in the third quarter, up 33.6% year over year.

Wayfair Inc. Price, Consensus and EPS Surprise

 

Wayfair Inc. Price, Consensus and EPS Surprise

Wayfair Inc. price-consensus-eps-surprise-chart | Wayfair Inc. Quote

Operating Results

In the third quarter, Wayfair’s gross margin was 23.4%, up 40 basis points on a year-over-year basis.

Adjusted EBITDA margin was (6.3%) compared with (4.5%) in the year-ago quarter. This was led by increasing investments, mainly in international regions served.

The company’s operating expenses of $799.6 million increased 48.6% year over year. Operating loss was $259.7 million, wider than the prior-year loss of $145.3 million.

Balance Sheet & Cash Flow

At the end of the third quarter, cash, cash equivalents and short-term investments were $1.3 billion, up from $714.5 million in the comparable year-ago period. Accounts receivables were $75.7 million, down from $77.3 million in the second quarter.

Cash from operations was ($76.4) million and capital expenditure totaled $68.6 million. Free cash flow was ($180.9) million compared with ($91.5) million in the second quarter.

Zacks Rank and Stocks to Consider

Wayfair currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Itron, Inc. ITRI, Stamps.com Inc. STMP and Carvana Co. CVNA. While Itron and Stamps.com sport a Zacks Rank #1 (Strong Buy), Carvana carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Itron, Stamps.com and Carvana is currently projected at 25%, 15% and 9%, respectively.

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