Shares of Wayfair whipsawed after the company reported that they had a bigger loss in the second fiscal quarter because the costs for things such as advertising and customer support are up.
They reported a loss of $181.9 million – $1.98 per share – compared with to a loss of $100.7 million – $1.13 a share – last year. Sales for the quarter are $2.34 billion, up 42% compared to a year ago.
The company has always reported double-digit growth in its revenue, but it still hasn’t been able to earn a profit. This could be due to its online-only nature since it is more difficult to acquire and retain customers for an online business than a physical store. That is why they will open their first location at the Natick Mall in Massachusetts sometime this fall.
GlobalData Retail Managing Director Neil Saunders said: “While Wayfair is expert at driving sales growth, it remains terrible at translating this into profitable gains. Wayfair’s advertising costs are out of control. … This completely erodes the already wafer-thin margins and pushes the company deep into the red.”
But Wayfair is committed to its strategy, CFO Michael Fleisher said: “In North America and increasingly in Europe, our investments are paying off in the form of greater scale and higher-levels of repeat over time, which tells us our strategy of not timing our investments to any particular quarter is working as intended over the long-term. We expect to stick to this philosophy and we will not alter our … investments to make any particular quarter more profitable.”
The company has a market cap of approximately $12 billion, and its stock has risen by more than 45% in 2019.