Wayfair's $306 Million Trading Day Leads to 64.56% Turnover Surge Despite Stock Price Decline

On April 30, 2025, Wayfair (W) experienced a significant trading day with a turnover of $306 million, marking a 64.56% increase from the previous day. However, the stock price closed down 3.27%.

Wayfair is scheduled to release its first-quarter 2025 earnings report on May 1, 2025, before the market opens. The company anticipates revenues to be flat or slightly negative compared to the same period last year. This follows a trend of declining sales, with a 4.7% annual decrease over the past three years, indicating a waning demand for its products. Additionally, the number of active customers has decreased by 3.2% annually over the last two years, suggesting a need for the company to revamp its features or user experience to stay competitive.

In the fourth quarter of 2024, Wayfair reported revenues of $3.12 billion, meeting analysts' expectations and showing a 2% beat. However, the company's non-GAAP loss of $0.25 per share was significantly below analysts' consensus estimates. The company's operating margin improved to -3.7% from -5.5% in the same quarter last year, and free cash flow increased to $102 million from -$9 million in the previous quarter. Despite these improvements, the company's active customer base decreased by 1 million year over year, and its EBITDA margin was 3.1%, in line with the same quarter last year.

Wayfair's business model, which includes a combination of scale-driven online marketing investments and expertise in converting customers, along with holding minimal inventory, has been under scrutiny. The company's high net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens. Additionally, the company's user acquisition efficiency is low, with 51.1% of its gross profit spent on sales and marketing expenses over the last year, indicating that its product offering can be easily replicated.