Home furnishings giant Wayfair has notoriously not turned a profit for years. With a surge in sales, increased fulfillment efficiencies and continual work toward profitability, Wayfair posted nearly $274 million in net income for Q2 2020.

Online sales surged 83.7% year over year for home furnishings giant Wayfair Inc. to reach $4.30 billion in online sales for its second quarter 2020, ended June 30, the retailer reported last week.

With many consumers spending time at home during the coronavirus pandemic, Wayfair benefited from consumers shifting their discretionary spending toward their homes and away from travel and entertainment, said CEO Niraj Shah on an earnings call with analysts according to a Seeking Alpha transcript.

Before the pandemic, ecommerce sales were gradually increasing as a share of total retail sales each year, and the trend was “supercharged” during the last several months, which fueled Wayfair’s sales growth, Shah said.

Wayfair gained 5 million new customers in the second quarter, which is more than the last four quarters combined, Shah said. Also within the quarter, it re-engaged more than 1 million “lapsed” customers, who had not made a purchase from Wayfair in the last 12 months, he said.

Wayfair went public in 2014, and while sales have grown in the last 6 years, (it is the sixth-largest North American online retailer according to Digital Commerce 360’s annual Top 1000 rankings), it reported losses for several quarters. Until this one. Wayfair reported net income of $273.9 million in Q2 2020 compared with a loss of $181.9 million in Q2 2019.

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Wayfair says four levers contribute to its gross margin, which help it achieve profitability, including using its logistic network to its full capacity, promoting house brands on its site and offering services for its suppliers, such as ads. Besides direct retail sales, Wayfair reported $3.1 million in “other income” in Q2, up from $322,000 in Q2 2019.

“Supplier services such as sponsored listings grew quite strongly in this environment, particularly a supplier shifting more their resources away from brick and mortar and traditional tradeshow formats and focus their attention on winning in an ecommerce sale,” Shah said.

Wayfair  says it has worked to make its fulfillment processes more efficient to handle the surge in orders. “Q2 demonstrated the wisdom of our strategic investments and the returns that they can generate,” Shah said. “Our proprietary logistics network allowed us to effectively meet peak demand, not just for a few days or a 3-week holiday stretch, but consistently over the course of a full quarter.”

Wayfair  says it expects to continue to turn a profit, as long as it continues to increase revenue at least 20% year over year or more, he said. “As our strong sales momentum continues, the inherent profitability of our platform will become increasingly apparent,” Shah said.

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For the second quarter ended June 30, Wayfair reported:

  • Total net revenue increased to $4.30 billion, up 83.7% year over year from $2.34 billion in the year-ago period.
  • U.S. net revenue increased 82.5% year over year to $3.65 billion up from $2.00 billion.
  • Net income of $273.88 million compared with a loss of $181.94 million.
  • Repeat customers placed 67.4% of total orders, a slight decrease from 67.8% of orders.
  • Shoppers placed 60.6% of total orders via mobile, up from 53.5% in Q2 2019.
  • Average order value was $227, a decrease from $255.

For the first 6 months, Wayfair reported:

  • Net revenue of $6.63 billion in the 6 months ended June 30, 2020, a 54.5% increase from $4.29 billion in the 6 months ended June 30, 2019.
  • U.S. net revenue increased to $5.63 billion a 53.8% increase from $3.66 billion.
  • Net loss of $11.99 million compared with $382.33 million loss.

Percentage changes may not align exactly with dollar figures due to rounding.

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