Wayfair Q2 Boosts Stock 28% As Customer Base Shoots Up
Shoppers looking to decorate their homes keep coming back to Wayfair (NYSE:W), sending shares of the online furniture retailer up 28% Wednesday as existing customers made more repeat purchases and second-quarter results came in above views.
Although it remains unprofitable, the recent IPO's active customer base jumped 53.5% to 4 million by the end of the quarter. During its earnings call, management attributed the quick growth rate to both ongoing strength in new customers and "increasing repeat behavior" from its existing customers.
Repeat customer orders expanded to 56.6% of total Q2 orders, up from 51.6% during the same period last year. Orders delivered shot up 80.7% to 2 million, with an average order value of $225.
Wayfair vies with the likes of Ikea, One Kings Lane and Williams-Sonoma (WSM), whose millennial-focused West Elm line offers a more modern aesthetic.
Restoration Hardware (RH) recently rolled out plans for a new line, RH Modern, though the luxury retailer's merchandise tends to start at a higher price point than its peers.
Wayfair, which went public in October, soared as high as 50.62 on the stock market today, closing up 28% at 48.95. Shares have shot up almost 70% from their IPO price of 29. Williams-Sonoma rose 0.5%, and Restoration Hardware dipped 0.3%.
While originally founded in 2002, Wayfair in its current form came together in 2011 when its founders merged 250 standalone e-commerce sites into one online shop.
In addition to Wayfair.com, Joss & Main, AllModern, DwellStudio and Birch Lane are all under the Wayfair umbrella.
For Q2, the company's adjusted loss narrowed to 15 cents per share from 55 cents, beating analyst forecasts for a 29-cent per-share loss. Revenue grew 66.4% to $491.8 million, well above consensus estimates for $438.5 million.
Direct retail revenue, i.e. sales mainly from Wayfair's five brands, surged almost 81% to $440.3 million — the fastest growth rate it has seen since Q1 2014.
Cowen & Co. analyst John Blackledge raised his price target on the company to 55 from 37, noting the "impressive acceleration" of Wayfair's direct retail revenue despite tough year-over-year comparisons.
The company's mobile presence also continues to grow, as 34.1% of total orders for its direct retail business were made on a smartphone or mobile device. In Q2 2014, 28.2% of orders were placed via mobile.
Wayfair CEO Niraj Shah said in a statement that the company is benefiting from a "strategic shift" in its advertising plan that aims to reel in "higher value customers with a propensity for repeat purchases.
For Q3, management said it now expects direct retail revenue of $445 million-$475 million, which would represent 56%-66% year-over-year growth.
Follow Elaine Low on Twitter: @IBD_ELow.
