Dive Brief:
- Wayfair’s customer base continued to slide in the first quarter, notching 21.1 million active customers — a 5.4% decline from the year-ago period.
- The online home goods retailer’s total net revenue for the period was nearly flat year over year at $2.7 billion. U.S. net revenue was up 1.6% year over year to $2.4 billion, while international revenue declined 10.9% to $301 million, driven by its exit from the German market.
- Wayfair narrowed its losses during the quarter, with operating loss down 48% to $122 million and net loss down 54% to $113 million.
Dive Insight:
Despite a shrinking customer base, Wayfair executives touted that the online retailer was able to “once again outperform our peers and take healthy market share.”
Though analysts were less certain about that notion. While the company reported first-quarter revenue gains in the U.S., “the overall market for home furnishings in the U.S. grew by 2.7% over the same period — so Wayfair has underperformed and lost share,” according to GlobalData Managing Director Neil Saunders.
Wayfair, which operates primarily online, has been working to reach more customers by expanding its reach offline. The company has steadily been opening stores across its banners, most recently announcing a second large-format store for its namesake banner set to open in the Atlanta area next year.
But those growth plans come at a time of overarching concerns from consumers over tariffs and the economy more broadly. While the home sector has rebounded somewhat recently after months of declines, the space remains vulnerable as tensions around a global trade war intensify.
“Any slowdown in the economy will be unhelpful for furnishings – especially bigger-ticket purchases,” Saunders said in emailed comments. “Although tighter budgets may draw more people to Wayfair, the brand does not have the low-price or value credentials of a company like Ikea, which are needed to help drive trade. This all leaves it a bit exposed.”
Wayfair executives, however, remained optimistic about its position in the face of tariffs, noting that its marketplace model shifts the burden to its sellers and suppliers.
“When an incremental cost like a tariff enters the system, suppliers have to make a decision on how much they want to pass through versus bearing themselves,” CEO Niraj Shah said on a call with analysts Thursday. “This is where the marketplace-like forces on our platform work most in our favor. The category we operate in is largely unbranded and highly substitutable. On top of that, we have thousands of partners selling through Wayfair, which means that there is intense competition amongst our suppliers to win each order.”
Looking ahead, the retailer expects gross margin to be between 30% to 31% of net revenue, while customer service and merchant fees are likely to be below 4%. Advertising is projected to be between 12% and 13% of net revenue.
“Periods of disruption have historically been moments where Wayfair pulls ahead, and today is no different,” Shah said. “We’ve deliberately built a platform that thrives in dynamic conditions — flexible, resilient and efficient. With strong momentum, a healthy balance sheet and a sharpened operating model, we’re confident in our ability to navigate what’s ahead and emerge even stronger.”