BOSTON — After a brief period of profitability during the pandemic, Wayfair has once again turned to negative numbers.
Its immediate goal for the coming quarter is to first break even and then return to profitability, CEO Niraj Shah told investors during an earnings call this morning.
“We’re continuing the work we set out last quarter to control the controllables and orienting Wayfair in this environment around three key principles: driving cost efficiency, nailing the basics, and earning customer and supplier loyalty every day. We are all focused on taking the steps needed to reach adjusted EBITDA profitability and cash flow neutrality in short order,” Shah said.
The company posted third quarter total net revenue of $2.8 billion which is down 9% from the third quarter of 2021. The net loss for the quarter was $283 million compared with a loss of $78 million in the third quarter of 2021.
The company posted gross profit of $824 million or 29% of total revenue for the quarter which ended September 30.
Wayfair stock is trading up more than 5% this morning but is down more than 85% from where it was a year ago.
Diluted loss per share for the third quarter was $2.66 compared with a loss of $.75 cents in the third quarter of 2021.
The company said the number of active customers in its direct retail business reached 22.6 million at the end of the third quarter, which is a decrease of 22.5% from the previous year. Repeat customers placed 6.8 million orders in the third quarter of 2022, a decrease of 19% from last year.
Shah added that Wayfair has direct visibility to more than half a billion dollars of savings and plans to deliver this target in 2023.
“However, we are not stopping there and have identified meaningful incremental efficiency opportunities, which we are also actioning as we speak,” Shah said. “Our execution against these initiatives is thoughtful and deliberate to ensure that we make progress toward our profitability targets without compromising the long-term growth potential in front of us.”
On the earnings call with investors, Shah said the goal remains the same as last quarter, returning to break even quickly in 2023 before targeting profitability in the mid-single digit margin level.
“Average order value will drop some in the near term, but we can’t tell by how much,” Shah said on the call. “Inflation is getting worse, so we are pricing items closer to their future cost to move them through faster. Customers will see relief in the form of reflecting these costs coming down. But although average order value falls, the conversion rate goes up and this offsets how it plays out too.”
New CFO Kate Gulliver said the company is focusing heavily on driving operational cost savings.
“Now is the right time to reengage best practices. Combined we have instituted an annualized cost savings of $500 million. 60% of this savings is from people reduction and 40% from operational savings.”
Wayfair cut 5% of its global workforce or 870 people in August. On the investor call, both Shah and Gulliver said they will provide information about additional cost savings measures being taken on the next quarterly call in February 2023.