It’s Catch 22 For Wayfair—Cost Increases, Losses Jump – Market News Updates
Market News Updates

It’s Catch 22 For Wayfair—Cost Increases, Losses Jump

Wayfair stock seems to have caught itself between the devil and the deep sea; pressurized by the skyrocketing operating costs and mounting figures of loss. Its Q2 profitability figures were dismal, reporting a $181.9 million loss as against a corresponding figure of $100.7 million loss for the previous year. Sales stood at $2.34 billion, up by 42% since the past year. But the overall operating costs which stood at $730.8 million, arise of 52%over previous year figures prevented the online retailer from translating the revenue increase into profit.

There was volatility in trading of the stock which had dipped by 7% prior to market opening. The stock however, rose by 2% and more on opening of markets. The last, they rose was at a rate of 0.25%.

The constituents of Q2 operating costs which proved to be stumbling blocks for the company included the higher spend on advertising, customer service, technology and some other operating fees. Notwithstanding the high costs, CFO Michael Fleisher stated that Wayfair would not make any change to its investment strategy. He said that their strategy seemed to yield results in Europe and North America as indicated by greater number of repeats and greater scale.

The direct retail business of the company saw a 17.8 million increase in the active customer numbers, a rise of 39.1% compared to the previous year. Order delivery rose by 42% and average order value reported an increase by a buck in comparison to the same period last year.

In any case, Wayfair is not an isolated case as most of the online-based businesses encounter this problem of failure to attain profits for their business. However, times can change for the company with the opening of its first brick and mortar store at the Natick Mall, Massachusetts around fall time.

The market cap of the company stood at $12 billion and the stock recorded a rise of 45% plus over this year.

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