Earnings Results: Wayfair’s stock craters toward worst day on record amid heated ad spending

by | Feb 23, 2023 | Stock Market

Wayfair Inc. shares were tumbling in Thursday trading after the online furniture retailer said it expected to reach its profitability goals earlier than previously estimated but also disclosed heavy advertising spending for the latest quarter. Wayfair
has embarked on a series of cost cuts involving layoffs and other areas, but Jefferies analyst Jonathan Matuszewski flagged that advertising spending as a percentage of sales was at its highest level in the latest quarter since early 2016.

“Wayfair is controlling what it can in terms of headcount, but this category continues to be deprioritized by consumers and therefore increased paid ad spend is necessary to spur demand,” he said. The company disclosed that advertising spending was 13.1% of net revenue in the fourth quarter. Chief Executive Niraj Shah said that from a marketing perspective, Wayfair sees consumers swimming in “negative headlines” about factors like interest rates and the housing market. “Well, what then happens is, if you tell them, hey, there’s the sale event, it’s got great value, turns out the top three quintiles of customers actually have an incredible amount of savings,” he said on Wayfair’s earnings call, according to a transcript provided by Sentieo/AlphaSense. “They still have significant excess savings from pre-COVID. That message caused them to be curious.” Wayfair shares were off 29% in Thursday afternoon action and on track for their largest single-day percentage decline on record. “From stock’s sharp sell-off, we believe investors see the [quarter-to-date] trend and elevat …

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