If Wayfair’s (W) stock performance makes you weak in the knees, we know a place where you could get a good deal on a chair.
The home goods company recently slashed the price tag on the Snugway Contemporary Leather Recliner and Ottoman by about 60% to $389.
The chair has a lever-engaged recliner, easy-to-clean bonded faux leather upholstery, and a convenient swivel function.
The ottoman has a steady solid base, and it’s wide enough that you can rest your feet on it without the fear of tipping or wobbling.
“Wobbling” might be one way to describe Wayfair’s stock, which is down nearly 16% year-to-date and off roughly 32% from a year ago.
Earlier this month, the Boston-based e-tailer missed Wall Street’s second-quarter earnings forecasts.
Wayfair posted an adjusted profit of 47 cents per share compared with 21 cents a year ago, short of Wall Street’s call for 49 cents per share earnings.
Revenue totaled $3.12 billion, down 1.7% from a year earlier and missing estimates of $3.18 billion in sales.
Gross profit, which is how much the company made after costs, shrunk by about 4.4% year-over-year.
“Customers remain cautious in their spending on the home, and our credit card data suggests that the category was down by nearly 25% from the peak we saw in the fourth quarter of 2021,” Wayfair CEO and co-chairman Niraj Shah, who co-founded the company with Steve Conine in 2002, said during the company’s earnings call.
Analyst expressed concern on the economy’s impact on Wayfair
Sarah L. Voisin/The Washington Post via Getty Images
Wayfair CEO: ‘People still need mattresses and tables and chairs’
“This mirrors the magnitude of the peak to trough correction the home furnishing space experienced during the great financial crisis, according to U.S. Census Bureau data,” he told analysts, referring to the Great Recession of 2008, the worst financial crisis in the U.S. since the 1929 Great Depression.
Shah cited such factors as malaise in the housing market, overspending in 2020 and 2021 that has warped the historic replacement cycle, and a slowing U.S. economy.
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“Over the first 5 months of 2024, new home sales are down by nearly 20% compared to the first 5 months of 2021, while existing home sales are down by more than 30%,” he said. “Customers have more than compensated for the overspending during the pandemic and have now underspent in the category compared to historic patterns.”
“This is in spite of the fact that the structural need for products in this category has not changed,” Shad added.
The situation has been so dire that the Washington Post reported real estate agents were quitting the business in droves due to slow sales and changes in commission structure.
“The real estate industry may be looking grim, but it’s always darkest before dawn,” TheStreet Pro’s Ed Ponsi wrote on Aug. 23. “Real estate activity should get a boost from lower interest rates.”
The Federal Reserve is expected to cut rates at its Sept. 17-18 meeting.
“Expectations for an increase in housing sales and refinancing are already being reflected in stocks related to the real estate industry,” Ponsi said.
And Shah expressed optimism about the future, saying that “people still need mattresses and tables and chairs.”
“They still need desks and bathroom fixtures and kitchen equipment,” he said during the earnings call. “And at some point, we expect a reversion to the mean. While we’ve yet to see the housing recovery, replacement for pandemic spending, and broader economic upturn, we anticipate these drivers around the horizon.”
“Given how deep we are into the cycle, it’s fair to expect the turnaround to come soon, and Wayfair is well positioned to benefit as it does,” he added.
Analyst flags Wayfair’s ‘muted prospects’
Argus downgraded Wayfair to hold from buy with no price target on Aug. 26, according to The Fly.
The firm pointed to Wayfair’s “muted prospects” due to decelerating home sales trends. Wayfair’s second-quarter revenue fell 1.7%, missing estimates.
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Wayfair’s earnings growth could be hindered given “stretched” consumer spending, less favorable operating leverage, and the need to reinvest profits in software that is used to compare the company’s prices to the competition, Argus added.
Earlier this month, Truist lowered the firm’s price target on Wayfair to $60 from $70 but kept a buy rating on the shares after the earnings miss.
The firm said it remains constructive on Wayfair despite lighter Q2 results and Q3 outlook, reflecting softer demand and higher promotional intensity amid a tough macro environment.
However, Truist said that while the stock lacks catalysts to move higher in the near future, the company’s sustained market share gains within the struggling home furnishing segment and meaningful cost efficiencies gained in the last 18 months serve as longer-term catalysts for when rates improve.
And Raymond James analyst Bobby Griffin lowered the firm’s price target on Wayfair to $65 from $70 and kept a strong buy rating on the shares.
Wayfair’s Q2 revenue was modestly below expectations, driven by continued category pressure during non-promotional periods, Griffin said.
The company continues to take share despite a soft industry environment and industry pressure on demand during the quarter. Wayfair delivered the best quarter of cash flow and profitability in three years, the analyst said.
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