Wayfair Reports Strong Earnings in Q3 2024
Strong Quarter for Wayfair Despite Customer Decline
Wayfair W announced its third-quarter 2024 non-GAAP earnings at 22 cents per share, surpassing the Zacks Consensus Estimate by 46.67%. This marks an improvement from a loss of 13 cents per share during the same quarter last year.
Net revenues reached $2.88 billion, edging past the consensus forecast by 0.04%, although this figure represents a 2% decrease year over year.
For the Last Twelve Months (LTM), net revenues per active customer fell by 1.3%, amounting to $545. However, this also beat the Zacks Consensus Estimate by 5.17%.
There’s a concerning trend in Wayfair’s customer base. The number of active customers dropped by 2.7% year over year to 21.7 million, which fell short of the consensus mark by 4.51%.
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Wayfair’s Price, Consensus, and EPS Performance
Wayfair Inc. price-consensus-eps-surprise-chart | Wayfair Inc. Quote
A Deep Dive into Wayfair’s Q3 Results
In the United States, which accounts for 87.1% of total net revenues, sales fell 2.33% year over year to $2.51 billion, missing the Zacks Consensus Estimate by 0.34%.
For international sales, which make up 12.9% of total net revenues, figures remained flat annually at $372 million, although this exceeded the consensus mark by 2.76%.
Wayfair saw an increase in orders per customer, which rose to 1.85 from 1.83 compared to last year. This was 3.12% higher than the Zacks Consensus Estimate.
The average order value grew from $297 to $310, surpassing expectations by 4.36%.
However, the overall number of orders delivered dropped to 9.3 million, reflecting a 6.1% year-over-year decline.
Repeat customers placed 7.4 million orders, accounting for 79.9% of total orders, but this was down 6.3% from last year.
Mobile devices contributed significantly, with 63% of total delivered orders placed via these platforms, rising from 61.7% in the previous year.
Wayfair’s Operating Highlights
In the third quarter, Wayfair reported a gross margin of 30.27%, slightly lower than last year’s figure of 31.15%.
Adjusted EBITDA increased to $119 million, up from $100 million in the prior year.
Customer service and merchant fees dropped by 17.6% year over year to $112 million.
In contrast, advertising expenses rose by 5% to $354 million. However, selling, operations, technology, and general and administrative expenses saw a decline of 19.4% to $480 million.
Wayfair incurred a GAAP operating loss of $74 million this quarter, a significant improvement from a $163 million loss last year.
Wayfair’s Financial Position
As of September 30, 2024, Wayfair’s cash, cash equivalents, and short-term investments stood at $1.3 billion, down slightly from $1.34 billion on June 30, 2024.
Long-term debt remained relatively stable, recorded at $3.061 billion compared to $3.059 billion as of June 30, 2024.
Cash from operations for the third quarter was $49 million, a recovery from the $245 million used in the previous quarter.
Despite this, Wayfair reported a negative free cash flow of $9 million in the third quarter.
Zacks Rating and Comparative Analysis
Currently, Wayfair holds a Zacks Rank of #3 (Hold).
In the wider retail-wholesale sector, other notable stocks include Alibaba BABA, Gap GAP, and Walmart WMT. While Gap and Walmart both carry a Zacks Rank of #2 (Buy), Alibaba is currently rated #1 (Strong Buy).
Year-to-date, Alibaba shares have risen 25.9% and is set to announce its third-quarter 2024 results on November 15.
Gap’s shares have dipped by 0.8% this year, with a report due on November 21.
Walmart has performed exceptionally well, climbing 56.5% since the start of the year, with its fiscal 2025 third-quarter results scheduled for November 19.
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