Media & Entertainment

Unpacking why Wayfair’s stock popped 23.7% today


In the midst of the day’s news chaos both political and business-oriented, you might have missed Wayfair’s big moment: In regular trading today, shares of the online home goods retailer shot 23% higher. It was an eye-catching gain during a period when the domestic economy is troubled, unemployment is rising and consumer spending is slowing.

Why did Wayfair shares rise so much in a single day? In a word, earnings. But there’s a bit more nuance to understand, so let’s talk about the company’s Q1 earnings report and what it can tell us about consumer spending trends in the COVID-19 era, because they just might impact a startup or two.

Q1 results

We’ll start with the basics: Wayfair reported Q1 revenue of $2.33 billion, up 19.8% from $1.94 billion in the year-ago quarter. The company’s gross profit rose a sharper 23.1% to $579.1 million, boosting Wayfair’s gross margins in the first quarter of this year.

The rest of Wayfair’s income statement is less attractive. The company’s operating costs, including customer service, merchant fees, advertising and a bucket of costs it calls “selling, operations, technology, general and administrative,” came to $841.2 million. That figure is far larger than reported gross profit, meaning that Wayfair’s losses for the period were large.

The company’s operating loss in Q1 2020 rose to $284.5 million (+42.4%), and its net loss totaled a slightly worse $285.9 million. Its operating cash burn also rose sharply — over 215% — to $256.3 million in the period. Wayfair closed Q1 with more than $624 million in cash, meaning that it was still well-capitalized at the end of the period.

Why did shares of Wayfair rise when its losses popped as much as they did? The expectations game, essentially.

Investors expected Wayfair to report adjusted losses of $2.60 per share. Instead, it turned in adjusted losses of $2.30 per share and its revenue topped an anticipated $2.31 billion result. So, despite some obvious potholes in its numbers, Wayfair beat the street and was richly rewarded.

Even more, the reason why it beat Q1 expectations might last a bit longer than just the first three months of the year.

Staying at home

Wayfair beat growth expectations in Q1, to investor delight, but it could crush them in Q2. In a nutshell, that’s why its share price shot higher — Q1 was better than expected, but not by that much, while Q2 might be bonkers.

To understand what’s going on, we need to read the earnings call transcript from the firm. Here’s what Niraj Shah, Wayfair’s CEO had to say on its earnings call (bolding: TechCrunch):

This period coincided with customers beginning to shelter in place at home, which led to new needs for essential products like cookware and kitchen appliances, home office products and children’s furniture and play items, and also brought to light ongoing renovation and decoration projects that customers are now taking on. The competitive landscape also shifted as many physical retail stores closed temporarily, leading customers to move increasingly towards shopping online across all categories, including home. This pickup in demand has continued to gain momentum. And in the U.S., the rollout of stimulus monies in mid-April served as an added accelerant of new and repeat customers coming to Wayfair. As a result, we have seen gross sales momentum build across almost all classes of goods across mobile and desktop platforms and across all regions in the US, Canada, the U.K. and Germany.

That’s the CEO’s overview. In summary, people are staying home at the moment and buying stuff for their house. Those two trends squarely line up with what Wayfair does, providing good lift to the firm.

Reading from the same transcript, CFO Michael Fleisher had more numbers to share that detail precisely why Q2 could blow Q1 out of the water (bolding: TechCrunch):

Quarter-to-date, our gross revenue growth year-over-year is trending at roughly 90%, translating to over $800 million added year-over-year on a constant currency basis. This momentum is widespread across almost all categories and includes comping over Way Day last year, which we deferred into later this year.

While we do not know how long these trends will persist, and thus will not provide a specific revenue forecast for the whole of Q2.

We’ve included that last riff as a cautionary item. Sure, the firm is seeing huge gains, but they might not last. So, don’t count on them. Investors, of course, are going right over their skis and bidding up the company’s equity aggressively, pricing in some of that upside to its present-day share price.

That’s standard, frankly.

What Wayfair shows is that the COVID-19 economy is a bust for many, but a boom for a select few. And apparently home-oriented e-commerce is hot right now. This may mean that startups working in similar spaces are enjoying rising demand. Expect private investors to place bets accordingly.

A good question for the future will be how much of the shift in spend to the web will persist post-COVID-19. Eventually we’ll have a vaccine, but will people keep buying home goods online?

More TechCrunch

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

16 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

3 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

3 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies