Wayfair CEO Says Declining Demand for Home Goods Reminiscent of Financial Crisis of 2008–09

A person holds a smartphone with the logo of U.S. e-commerce company Wayfair Inc. on screen in front of the website in Stuttgart, Germany, on Aug. 28, 2022. (T. Schneider/Shutterstock)

Demand for household goods is at the same level seen during the financial crisis of 2008–09, the CEO of furniture and home goods company Wayfair has said, as the firm continues to face challenges amid ongoing “macro headwinds.”

Wayfair CEO Niraj Shah made the comments on Aug. 1 as the e-commerce company announced its second-quarter results.

The Boston-headquartered company saw declines across the board in its fiscal second quarter, reporting a $42 million loss in the second quarter that ended June 30, or $0.34 per share.

Earnings, adjusted for stock option expense and non-recurring costs, came to $0.47 per share.

Meanwhile, total net revenue was $3.1 billion, marking a decrease of 1.7 percent year over year, and U.S. net revenue was $2.7 billion, which is a decline of 2 percent year over year.

Gross profit was $941 million, the company said.

The results missed out on Wall Street expectations, with analysts surveyed by Zacks Investment Research anticipating earnings of $0.50 per share and revenue of $3.18 billion.

Wayfair said it had 22 million active customers as of June 30, marking an increase of 0.9 percent year over year.

However, Shah said customers have changed the way they shop amid “continued macro headwinds” that are putting pressure on their pockets.

“Customers remain cautious in their spending on the home, and our credit card data suggest that the category correction now mirrors the magnitude of the peak to trough decline the home furnishing space experienced during the great financial crisis,” he said.

Economy Expands, but Retail Sales Stall

Still, the CEO said that despite the challenging macro-environment, Wayfair had its best quarter of adjusted EBITDA and free cash flow generation in three years, which he said was “clear evidence of our strict operating discipline.”

“We are running the business with the goal of demonstrating substantial growth in profitability this year, even as the top line remains challenging. And that will be our mindset every year going forward as well,” he said.

Wayfair announced plans earlier this year to lay off 1,650 employees, or about 13 percent of its workforce, as part of cost-saving efforts.

At the time, Shah told employees that the company had gone “overboard in hiring during a strong economic period” and “veered away from [its] core principles.”

Wayfair said the job cuts would lead to annual cost savings of $280 million.

Still, the retailer went on to open its first brick-and-mortar store just months later in May 2024 in Wilmette, Illinois, saying in a statement at the time that it hoped to “meet customers where and how they prefer to shop.”

The company’s earnings report comes after the U.S. economy continued to expand in the second quarter, topping economists’ expectations despite interest rates remaining at a 23-year high, according to the advanced estimate from the Bureau of Economic Analysis published on July 25.

The U.S. economy grew at an annualized pace of 2.8 percent in the April–June period, up from 1.4 percent in the first quarter, according to the data. That was fueled by a 2.3 percent gain in consumer spending for goods and services.

Still, retail sales in June remained at zero percent, while personal spending crept up by just 0.2 percent in May, suggesting consumers are being more cautious when it comes to splashing the cash amid stubborn inflation.

The situation may well change, however, if the Federal Reserve slashes interest rates in September, as it has signaled in recent weeks.

Shares of Wayfair dropped by more than 8 percent shortly after the company published its second-quarter results and are down by more than 31 percent year over year.

Andrew Moran and The Associated Press contributed to this report.