Wayfair cofounders Niraj Shah and Steve Conine have always had a quick retort for anyone wondering whether their home furnishings site could weather an economic downturn: Yes, they could. And in fact, they predicted it would thrive.
“You actually capture market share faster” during a recession, Conine told the Globe in 2018, as customers become more price-sensitive.
On Wednesday, Wall Street saw a glimpse of what they’d been promising, as the company outperformed expectations in its second-quarter financials, and reported its first profitable quarter since the company went public in October 2014.
“We are all currently living and operating in uncertain times, which are dominated by the global pandemic as well as pressing social issues,” Shah said on Wednesday. “The second quarter was a very strong period for Wayfair. Our strategic long-term investments positioned us well to serve our customers and to quickly adapt during a challenging time.”
He said the company saw “unprecedented demand” in the quarter and record numbers of new and repeat customers, with 26 million total customers as of June 30, an increase of 46 percent over last year. And the unique circumstances of the COVID-19 pandemic have led customers to reallocate the money they’d typically spend on travel and entertainment and instead “explore how to use their homes in new ways, and seek comfort in them.”
The company reported its earnings per share at $3.31, which was better than the $0.95 that analysts had estimated. And revenue for the quarter was $4.3 billion versus an estimate of $4.04 billion. Wayfair’s quarterly profit was $273.9 million. (The company had been profitable in its pre-IPO and pre-venture capital days.) At the close of trading Wednesday, Wayfair stock was up 3.6 percent, with a share price around $301.
It’s been a tumultuous year for one of Boston’s fastest-growing companies. In February, Wayfair announced it had grown too quickly and would be laying off 550 workers — or 3 percent of its workforce — including 350 in Boston. At the time, Shah acknowledged the company had become less efficient and had been investing in too many disparate areas.
The company now employs 16,200 workers worldwide, according to Wednesday’s earnings call. Shah said that the slowdown in hiring has resulted in a more “tightened execution” of the company’s long-term goals, allowing it to navigate the pandemic.
Yet, despite the rosy picture, some analysts expressed skepticism that Wayfair’s first profitable quarter will be a turning point for the company.
“It seems like it’s too early to be patting themselves on the back. You have to wonder if it’s all a temporary burst in demand,” said Sucharita Kodali, a retail analyst at Forrester Research. “I think that they were unique beneficiaries of people being forced into shelter-at-home orders and work-from-home restrictions. But it’s not like you’re going to change out your outdoor patio furniture again.”