Wayfair Continues Strong Margin Positive Growth in 2020
Wayfair, a good representation of the changes in the e-commerce home category this year, reported earnings in early November. I expected Wayfair to continue strong margin-positive growth this quarter and that's what they delivered.
A few points:
Net revenue up 67% year on year consistent with amazing home category growth.
Due to the number of profit dollars generated, this remains the second positive EBITDA quarter in a row for the US.
International continues to lose money, however, and likely needs a lot more scale yet to turn positive.
I still think Wayfair benefits long-term from having the founders be the largest shareholders. If another CEO takes over, investments and growth would likely drop precipitously. Perhaps improving profitability in the short-term, but underinvesting in the larger Home category opportunity long-term.
After I shared the Q4 earnings report slides (and transcript), folks picked up on the same thing - which John Peterson states pretty clearly: “Wayfair's current team gets it. Wayfair is describing the customer problems they have to solve, instead of falling in love with a specific way they solve the problems.”
Melanie Watts chimed in to say she was not surprised to see this success, saying “Being a loyal shopper of Wayfair, their customer service is extraordinary. It's worth paying more for an item because you know if there are any issues they will be resolved quickly and fairly.”
Tim Reilly added “They are one of the only companies that has earned their spot ahead of Amazon when I'm searching for something in their sweet-spots (home furnishings, outdoor living, etc.). Slide 9 [of the earnings report] describes why perfectly.”
More than anything, I think CastleGate will be the future of this business. The furniture logistics market is super-challenging, fragmented, and not easy to build. What they are building I feel is truly unique and underappreciated.
