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The yield on the 10-year Treasury note, which helps set interest rates for everything from mortgages to credit cards, hit a 19-year high on Wednesday. This move makes it more expensive for people to buy homes or finance large furniture purchases.
For Wayfair, higher rates are a double hit. They slow down the housing market, which is the main driver for furniture sales, and they increase the cost of the debt Wayfair uses to run its business. The stock fell over 7 percent on Wednesday as these borrowing costs climbed.
The U.S. Treasury Secretary announced that a trade truce with China will be extended through early January. This delay prevents new taxes on imported goods, known as tariffs, from kicking in during the busy holiday shopping season.
This is a relief for Wayfair because a large portion of the furniture and home goods sold on its site is manufactured in China. Avoiding immediate new tariffs helps the company keep its prices stable for customers and protects its profit margins on each sale.
Source: CNBC
Wayfair launched a new advertising campaign this week focused on the reliability of its delivery service. The push includes partnerships with professional football and features quarterback Matthew Stafford in its commercials. While celebrity endorsements can help keep the brand top-of-mind, they are a routine part of retail marketing. For long-term owners, the real test remains whether this spending actually brings in new active customers or increases the amount existing users spend on the site.
Source: PRNewsWire
Retail sales in the US climbed more than expected in August, recovering from a drop in July. The growth was broad, with 12 out of 13 categories showing higher spending as back-to-school shopping helped offset the cost of more expensive gasoline.
This is a helpful sign for Wayfair because its business depends on people feeling confident enough to spend on non-essential items. While this report covers the whole economy, steady consumer spending suggests that the market for home goods is holding up despite higher costs elsewhere.
Source: Bloomberg Markets and Finance
Existing home sales dropped 2 percent in August as rising mortgage rates made it more expensive for people to buy houses. This is a direct headwind for Wayfair because its business relies on people moving into new homes, which is usually when they spend the most on furniture and decor.
While Wayfair has been winning market share from physical stores, a frozen housing market shrinks the total number of customers looking for large items like sofas and dining sets. If fewer people are moving, the company has to rely more on smaller decor purchases or people replacing old furniture, which can be harder to grow.
Source: WSJ
Management has beaten its own profit targets for seven of the last eight quarters. This consistent record shows they have a firm handle on costs and set bars they know they can clear.
| Expectation | |
|---|---|
| EPS | $0.78 |
| Revenue | $3.37B |