Wayfair's stock sinks, as investors worry expansion plans will hurt profits

By Bill Peters

The stock has now tumbled more than 30% in a little over a month, but was still up nearly 80% over the past 12 months

Wayfair's stock was suffering its worst postearnings reaction in nearly four years, after the company unexpectedly swung to a net loss for the latest quarter and warned that profit margins may narrow.

Shares of Wayfair sank Thursday toward a four-month low, as investors zeroed in on an unexpected fourth-quarter loss for the online retailer, which said its plans to expand in a wobbly furniture industry could put pressure on profit margins.

The company (W), which sells furniture and home decor, reported fourth-quarter revenue that rose 6.9% from a year ago - to $3.34 billion - slightly above the average analyst revenue estimate compiled by FactSet of $3.30 billion. Adjusted earnings per share, which excludes nonrecurring items, were 85 cents, above estimates for 69 cents. The company booked a per-share loss of 25 cents a year ago.

However, on a net basis, which includes losses on debt extinguishment and the impact of equity-based compensation, Wayfair lost 89 cents a share, falling well below Wall Street's expectations for 1 cent per-share profit.

The stock dropped 13% on Thursday, for its worst one-day post-earnings performance since it tumbled 14.1% on May 20, 2022. While the stock was still up 76.6% over the past 12 months, it has shed 31.3% since closing at a four-year high of $119.05 on Jan. 13.

During the company's earnings call on Thursday, Chief Financial Officer Kate Gulliver said she expected first-quarter gross margins, which are a measure of how much is earned on sales, of 30% to 31%, with results more likely to land on the lower end of that range. That range is roughly the same as where margins have held over the past two years.

But as the company tries to invest in the business and take a bigger slice of a furniture market hit by tariffs, cautious home buyers and reluctant consumers overall, margins could sometimes slip below that range, she said.

"As we look deeper into the year, we expect there will be opportunities for us to dip gross margins slightly below 30% as we look to capture share at a faster rate and generate more gross profit dollars at a slightly lower margin," she said.

Wayfair also plans to invest in its rewards program, which it launched in 2024, and in improving shopping on the site.

The company still expects "mid-single-digit" sales growth for the first quarter.

-Bill Peters

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02-19-26 1820ET