Online furniture retailer Wayfair's net loss widened in the first quarter as its sales surged nearly 20%, with more people flocking to its website to furnish their home offices and bedrooms during the coronavirus pandemic.
Its shares shot up Tuesday morning to a 52-week high of $181.39. The stock, which has a market value of $16 billion, was recently up more than 26%.
"Home is becoming an area that customers are disproportionately investing into," Chief Executive Niraj Shah told analysts during a post-earnings conference call.
More people are stocking up on kitchen gadgets and materials for do-it-yourself home decor projects to keep busy, he explained, as public gatherings and events have been canceled to prevent the spread of Covid-19. Wayfair also tends to outperform the competition during periods when the economy is in a recession, the CEO said.
Here's how Wayfair did in the first quarter ended March 31:
- Earnings per share: A loss of $2.30, adjusted
- Revenue: $2.33 billion
Wayfair reported a net loss of $285.87 million, or $3.04 a share, compared with a net loss of $200.39 million, or $2.20 per share, a year ago.
Excluding one-time items, Wayfair lost $2.30 per share.
Net revenue grew nearly 20% to $2.33 billion from $1.94 billion a year ago.
Analysts expected the company to report an adjusted loss of $2.60 per share on revenue of $2.31 billion, according to a poll by Refinitiv.
"The broader market disruption has highlighted the many differentiated advantages we have built as the e-commerce leader in home over the last two decades," Shah said.
The company said it delivered 9.9 million orders during the quarter, up 21% year-over-year. It said repeat customers placed 6.9 million orders, representing an increase of almost 28%. Average order value dropped $2 from a year ago, to $235 per order.
Despite its sales gains, 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 on advertising to acquire new customers on the internet. Wayfair has yet to report a profit, and its quarterly losses continue to widen. Wayfair went public in October 2014.
The company spent $275.76 million on advertising during the first quarter, up from $243.97 million a year ago.
"We are making significant strides toward profitability by driving gross margin expansion, increasing marketing efficiencies, and gaining leverage on operating expenses," Shah said Tuesday morning.
During the Covid-19 crisis, among a number of precautionary measures, Wayfair has introduced no-contact delivery, where signatures are no longer required for boxes. Drivers are being instructed to wash or sanitize their hands between deliveries. It also has started taking daily temperature checks at its distribution facilities.
Still, one analyst only views the pandemic, which has forced thousands of retailers' stores shut, as a "short window of opportunity" for sites such as Wayfair.
"While many other retailers have remained closed, Wayfair has most likely been a beneficiary in terms of customer numbers and spend," GlobalData Retail Managing Director Neil Saunders said.
"However, we are less optimistic about profits," Saunders added. "The cost of fulfilling home furnishings online is far from cheap and higher expense associated with safety and protection during the coronavirus crisis will further flatten already thin margins."
Wayfair said it ended the first quarter with cash, cash equivalents, and short- and long-term investments on hand of $891 million.
Including Tuesday's gains, Wayfair shares are up more than 84% this year.
Read the full earnings release from Wayfair here.
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