Why Is Wayfair (W) Stock Down 20% Today?

  • Wayfair (W) stock is down about 20% so far on Friday.
  • Management just announced plans to cut about 5% of the company’s global workforce.
  • This loss for W stock comes amid a disappointing second-quarter earnings report.
The Wayfair (W) logo on the screen of a mobile phone with a purple background
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Online furniture and home goods retailer Wayfair (NYSE:W) is taking a hit amid a sea of red ink for the major equity indices. Right now, W stock is hemorrhaging about 20% after management announced plans to cut hundreds of employees. Wall Street is seeing the disclosure as yet another example of how inflationary pressures are negatively impacting the consumer economy.

Earlier this morning, The Wall Street Journal reported that Wayfair would “lay off about 870 employees as part of efforts to manage operating costs and realign investment priorities.” This reduction translates to about 10% of the e-commerce company’s corporate team and 5% of its global workforce. In May, Wayfair had previously begun a hiring freeze..

Per The Wall Street Journal’s report, W stock has lost “more than two-thirds of its value this year.” As of this writing, Wayfair shares are down by over 70% on a year-to-date (YTD) basis. WSJ added about the recent workforce cuts:

“The Boston-based furniture and home-goods company said it expects the layoffs to cost between $30 million and $40 million, consisting largely of employee severance and benefits. These costs are expected to be reflected in the company’s current quarter.”

Poor Financial Performance Dogs W Stock

While these new layoffs impose their own significantly negative implications for W stock, they’re not the only news hurting Wayfair right now. Indeed, the job cuts are happening against the backdrop of a disappointing miss for the second quarter.

In early August, another Wall Street Journal article noted that Wayfair’s Q2 revenue “declined about 15% from a year ago to $3.3 billion.” This top-line decline led to severe challenges in the bottom, too. Wayfair reported a net loss of $378 million for the period, contrasting sharply with a profit of $131 million in the year-ago quarter.

According to WSJ, the latest Q2 report represents yet another entry in the company’s decline. Previously, Wayfair had benefitted from the pandemic, providing an online outlet for shoppers sheltering in place. A surge in consumer spending as Covid-19 restrictions faded had bolstered W stock as well.

Unfortunately, Wayfair can no longer depend on those tailwinds. “It is not surprising that our mass customers are being more deliberate about where their discretionary dollars are going,” says CEO Niraj Shah.

Why It Matters

While active customers slipped considerably for Wayfair — down 24% in Q2 — those that are buying are spending more. Per The Wall Street Journal, “Wayfair’s average order value in the second quarter increased about 19% year over year to $330.”

Nevertheless, the fact that a large chunk of customers tightened their belts during the period implies anxieties for other sectors of the economy. If families view buying furniture as an onerous expense, buying a house to put it in may be a non-starter.

All told, W stock may continue to struggle moving forward.

On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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