Wayfair Plunges as Forecast Miss Heightens Growth Concerns
Wayfair Plunges as Forecast Miss Heightens Concern About Growth
(Bloomberg) -- Wayfair Inc. plunged to its lowest levels of the year after the online home-goods retailer gave a disappointing outlook for the critical holiday quarter.
The shares fell 17% to $84.23 at 12:32.m. in New York, their lowest since Dec. 26. The company said on its conference call with analysts and investors that it expects fourth-quarter net revenue of $2.48 billion to $2.525 billion, missing even the lowest of analyst estimates. Gross margin is expected to fall in the range of 23% to 24%, while analysts on average were looking for 24.1%.
It had already been a rough week for Wayfair with the stock falling 14% over the past three days. Ahead of the results, Wedbush said investors were worried about the company’s profitability and growth outlook, and Credit Suisse cautioned about near-term tariff headwinds. On Thursday, the Boston-based company cited “some short-term tariff related volatility” in its earnings release. Wayfair’s gross margin trailed estimates in the third quarter, and its adjusted loss per share was wider than expected.
Gordon Haskett downgraded its rating on the stock to hold from accumulate, saying despite an increased focus on profitability in retail and e-commerce, “Wayfair’s lack of urgency on this front is a bit perplexing.” There are also concerning signs that it’s getting more expensive for Wayfair to attract new customers, and there’s a bit of a slowdown in home-furnishing spending, analyst Chuck Grom wrote in a research note.
Morgan Stanley’s Simeon Gutman said that while he expected a weaker fourth-quarter forecast, the magnitude of the slowdown is worse than anticipated. Recent high-profile but unprofitable initial public offerings are contributing to the market’s renewed focus on profitability, Gutman said.
“The key question becomes how long W will have to endure top- and bottom-line headwinds before reaching an inflection point after which revenue growth re-accelerates and losses narrow,” Gutman wrote, referring to Wayfair by its stock ticker. “We have a relatively low level of confidence all of the issues W is contending with will be resolved in the next couple of quarters.”
This week’s slump may pay off big for short-sellers like Citron Research’s Andrew Left. Bets against Wayfair are near the highest of the year, with short interest accounting for more than 27% of the available shares, according to financial analytics firm S3 Partners. Shorts have been on a rollercoaster ride after the stock’s early-2019 rally.
--With assistance from Bailey Lipschultz.
To contact the reporters on this story: Catherine Larkin in Chicago at clarkin4@bloomberg.net;Courtney Dentch in New York at cdentch1@bloomberg.net
To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Scott Schnipper, Jennifer Bissell-Linsk
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