The stock of Wayfair (W 74.78, -20.92, -21.9%), a leading direct-to-consumer home furnishings and decor company, has lost its winning way in the wake of the company's fourth quarter earnings report.
Actually, Wayfair didn't report any earnings, which is typical for this growth-minded company. The problem, however, is that the loss it reported was larger than expected.
For the fourth quarter ended December 31, Wayfair reported a non-GAAP diluted net loss per share of $0.58, which was worse than analysts' average expectation.
That loss was registered despite a 46.2% year-over-year increase in total net revenue of $1.44 billion, which underscores the extent of the investments Wayfair is making in price, advertising, and shipping to name a few items in order to grow its market share in a very competitive industry.
Wayfair saw a gross profit of $332 million in the fourth quarter, yet its gross margin as a percentage of sales dropped 110 basis points to 23.1%. Its loss from operations, meanwhile, increased to $67.7 million from $43.8 million in the same period a year ago.
The investments Wayfair has made have translated into more customers.
At the end of the fourth quarter, the company had 10.99 million active customers versus 8.25 million in the same period a year ago. Net revenue per active customer over the last twelve months increased 6.8% year-over-year to $422. Repeat customers accounted for 62.4% of orders versus 58.0% in the fourth quarter a year ago.
Wayfair, then, is connecting with a growing base of customers, but the losses it is registering to grow its business are raising some eyebrows.
Looking at the first quarter, Wayfair said on its conference call that it sees revenues in the range of $1.33 billion to $1.36 billion. That is above the consensus estimate and up approximately 40% at the midpoint. Its advertising expense as a percentage of sales, however, is expected to exceed last year's 12.3%; and Wayfair is anticipating negative EBITDA for its U.S. business.
Prior to today's price plunge, shares of W were up 138% over the last 52 weeks and up 19.2% in 2018. The-year-to-date gain, though, has been wiped out with today's selling.