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Woocommerce Category Post Widget
Niraj Shah, CEO, Wayfair
Ashlee Espinal | CNBC
Wayfair shares surged more than 37% Monday after the online furniture company said its business is booming, as people furnish their home offices or decorate while they are shut in during the coronavirus pandemic.
Wayfair said in a press release that when it entered March, gross revenue growth was just under 20%, similar to trends during January and February. But by the end of the month, growth more than doubled. Wayfair said the trend has persisted into April.
Much of the country has shifted to working from home, or remote learning, as offices and schools close to try to help curb the spread of COVID-19. Some consumers have needed to spruce up their home offices and have been looking online for a more comfortable chair or a standing desk. With most bricks-and-mortar stores temporarily shuttered, Wayfair has benefited from fulfilling these needs.
Other consumers are using the extra time they are spending at home to decorate.
“Wayfair’s e-commerce model is uniquely suited to serving customers’ very real needs at this challenging time,” CEO Niraj Shah said. “We are encouraged by our increasing sales momentum, yet remain highly focused on our plan to rapidly reach profitability and positive free cash flow.”
Wayfair said Monday that it expects to either meet or exceed its previous outlook for revenue growth during the first quarter of fiscal 2020, of up 15% to 17%.
The company added that it is “accelerating” efforts to become profitable, without going into too much detail. It said it will provide an update on those strategies when it reports quarterly earnings on May 5.
The issue for Wayfair has long been, and continues to be, how to make money. The company has been criticized, among other things, for spending too much money on advertising to acquire new customers on the internet. Wayfair has yet to report a profit, and its quarterly losses have widened in recent quarters. Wayfair went public in October 2014.
“The fact that Wayfair is seeing an increase in sales makes sense,” said Dan McCarthy, an assistant professor of marketing at Emory University. “Wayfair had no physical stores, while its competitors do, which those competitors could not sell through.”
Prior to COVID-19 striking, only about 14% of total furniture sales in the U.S. were made online, McCarthy said. “Remove 86% of the supply … [and] those who can still supply the market will see a pop.”
But the gains might not last long.
“Of course, to the extent that the pandemic is a short-lived phenomenon, when those stores reopen, that will bring that 86% of the supply back on the market,” McCarthy cautioned.
The test for Wayfair will be trying to maintain new customers and enticing them to buy more without racking up too many expenses that prevent the company from reaching profitability.
Wayfair said it has introduced no-contact delivery, where signatures are no longer required for boxes, and drivers are being instructed to wash or sanitize their hands between deliveries. It said it has started taking daily temperature checks at some of its distribution facilities, with a broader rollout planned in the next few days.
The company also said it has sold $535 million of five-year convertible senior notes, to strengthen its balance sheet during the pandemic.
Even with Monday’s gains, Wayfair shares are down about 25% this year. The company has a market cap of about $6.8 billion.