Wayfair Drops as Colder Weather Muddies 1Q Guidance

Wayfair shares slump as much as 16%, hitting a four-month low intraday, after the home goods retailer said it expects mid-single-digit topline growth year-over-year for the first quarter, which Jefferies considers to be conservative and attributable to colder weather to start the year. The company also said during the conference call that it sees 1Q gross margins “likely at the low end” of the 30% to 31% guidance range. Wayfair Chief Financial Officer Kate Gulliver joins Bloomberg Businessweek Daily to discuss. She speaks with Carol Massar and Tim Stenovec. (Updates with details from conference call, Barclays and Jefferies comments.)

Wayfair shares slump as much as 16%, hitting a four-month low intraday, after the home goods retailer said it expects mid-single-digit topline growth year-over-year for the first quarter, which Jefferies considers to be conservative and attributable to colder weather to start the year. The company also said during the conference call that it sees 1Q gross margins “likely at the low end” of the 30% to 31% guidance range.

Wayfair shares rose 11% this week ahead of the print

“We believe this is a solid print with nothing major to complain about, despite our expectations that the buyside was embedding slightly higher top-line growth and active customer additions after the strong performance in the prior quarter,” William Blair analyst Phillip Blee writes

Blee said buy-side investors were looking for top-line growth in the 9% to 10% range after Wayfair’s 9% growth in 3Q

In addition, the “slightly softer” additions in active customers “could be an area of focus for investors with concerns about the sustainability of AOV growth”

Still, he remains encouraged by the company’s “ongoing [market] share gains against a tough industry backdrop and its ability to maintain steady margin gains despite an increasingly promotional competitive environment”

Rates outperform

Bloomberg Intelligence analyst Poonam Goyal says that while Wayfair’s 4Q results mostly outpaced consensus, the 0.5% decline in active customers “raises concerns”

View the report here

Barclays analyst Seth Sigman says W guided 1Q sales up mid-single digits, marking a deceleration from 4Q that seems to be largely attributed to weather that has been disruptive in many of its markets

“Gross margin for Q1 is guided to the low end of the 30-31% range, largely consistent with expectations, but potentially below that throughout the year”

Rates overweight

Jefferies analyst Jonathan Matuszewski says weather was likely a headwind QTD, which could have led to slight conservatism in W’s MSD% guide for 1Q

“Near-term, we see the stock range-bound as puts & takes to key margin drivers are understood”

Rates hold

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