by Apparel Resources News-Desk
02-November-2018 | 2 mins read
Online furniture retailer Wayfair lost more than US $ 1 billion in market value after it posted a larger-than-expected loss for the third quarter and high spending to tap new customers. The shares of the retail firm slid by more than 14 per cent.
Wayfair’s loss widened to US $ 151.7 million, on revenue of US $ 1.7 billion, up 43.3 per cent as compared to last year. The non-GAAP loss was US $ 1.28 per share as compared to Wall Street estimates of US $ 1.09 per share.
However on the bright side, Wayfair fetched 3.6 million new active customers over the past year, about 35 per cent more than it had in 2017. Also, despite the disappointing earnings, the company is investing in its long-term success by increasing investments in key areas including major hiring spree.
Neil Saunders, Managing Director, GlobalData Retail, mentioned in his research note, “Over the same period, spend on advertising was around US $ 707 million. This works out at US $ 196 per new customer. When customers only spend US $ 443 a year, this seems like a rather excessive and completely unprofitable, acquisition cost.”
CEO Niraj Shah confirmed that the company has hired around 2,000 people in the first three quarters of this year. Wayfair is also investing heavily in its logistics network and an overseas expansion.
Meanwhile, the Boston-based firm is still outperforming the market courtesy its customer centric initiatives.
Furthermore, the retailer is also facing competition in the segment from leading e-retailer Amazon and is betting big on investment on technology for the future. Wayfair Co-Founder Steven Conine outlined the company’s investment in visualization technologies such as augmented reality, virtual reality and mixed reality.
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