Wayfair on Thursday reported that second quarter direct retail net revenue rose 48.8% year over year to $1.6 billion and that active customers in that business rose 34% to 12.8 million, as of June 30. The quarter marked the largest year-over-year direct retail dollar growth in the company’s history, CEO and co-founder Niraj Shah told analysts, according to a conference call transcript from Seeking Alpha.
But net loss in the quarter was $100.7 million, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was negative $34.8 million, or negative 2.1% of total net revenue, according to a company press release.
The online furniture seller also plans to open its first physical store this fall, according to a tweet from the city of Florence, Kentucky, where the store is being built. Wayfair didn’t immediately respond to Retail Dive’s request for comment on the plans.
Wayfair continues to struggle to scale even as consumers increasingly get comfortable buying furniture on the web.
The e-retailer got a revenue boost from its first-ever one-day sale in April, which resulted in the largest single revenue day in the company’s history, executives told analysts Thursday. And its marketing is paying off: From July last year to June this year, the retailer’s direct traffic rose 66%, according to a report from digital intelligence firm SimilarWeb emailed to Retail Dive in July.
“Dollars in the home category are continuing to move online, and we believe we can keep taking an outsized share by delivering the best customer experience with vast selection, inspiring visual merchandising, fast and convenient delivery and world-class customer service,” Shah told analysts on Thursday.
But margins are being hit by logistics and advertising. Over the last four quarters, Wayfair “has not been able to surpass consensus [earnings] estimates,” according to Zacks Investment Research. In the second quarter, Wayfair’s loss was worse by 6.94% from what Zacks analysts had projected. Last quarter, its 91-cent per share loss was worse by 5.81%.
Still, the company continues its push and now appears to be trying to broaden its reach into the brick-and-mortar channel.
We are excited to announce that Wayfair, one of the world’s largest online destinations, will open a retail outlet store at 5101 Renegade Way this fall.
We look forward to sharing additional information as the grand opening nears. pic.twitter.com/YHsp0lRDHy
— City of Florence, KY (@cityofflorence) July 31, 2018
The logistics of online furniture sales are particularly tricky because customers can’t see or touch merchandise before they buy, which leads to higher returns on goods that are already expensive to ship. Post-purchase solutions firm Narvar has found that, on average, 40% of those buying apparel and home goods online at least occasionally buy more than they want in order to try things out at home.
But Wayfair’s expenses may only rise if it plans a fleet of physical stores, something it’s resisted until recently. The company’s planned store in Kentucky could be a test or the first in a line.