• by Sarah Mahoney  @mahoney_sarah, February 24, 2023

While its cost-cutting measures are helping, and some of its results did better than expectations, Wayfair's latest quarterly results show many of its underlying problems aren't going away.

Revenue at the Boston-based company fell 5% compared to the same quarter a year ago, to $3.1 billion. In the U.S., the decline was closer to 2%, while international sales sank 20%. For the fourth quarter, losses swelled to $351 million, compared to $202 million in the prior year's comparable period. That puts its loss for the full year at $1.33 billion -- more than expected.

The news scared investors, driving its stock price as much as 27% lower following the announcement.

The company claims that despite the 19% drop in active customers for the quarter, which now number 22.1 million, it is gaining market share.

"We enter 2023 as a lean, focused team driven by the same key priorities that defined much of 2022 -- driving cost efficiency, nailing the basics, and earning customer and supplier loyalty," said Niraj Shah, Wayfair's chief executive officer in the announcement. "We are excited to see customers respond positively to improvements in our core recipe, with compelling pricing, faster delivery times and increasing availability."

And some observers think Wayfair's long-term prospects remain solid.

"Similar to other tech-driven, consumer-focused companies, Wayfair has undertaken significant expense controls lately to drive the company towards sustained profitability and cash self-sufficiency," writes Brian Nagel, who covers Wayfair for Oppenheimer. "Cost controls have improved meaningfully."

Nagel continues to rate the company as likely to outperform its peers, but the short-term outlook is troubling as sales continue to soften. "We are hard-pressed to envision Wayfair shares moving appreciably higher until the company's business model showcases improved, broad-based fundamental momentum."

Wedbush Securities, while describing Wayfair's first-quarter forecast as disappointing, also sees a bright side and continues with its "outperform" rating. "While the cost savings outlook is less favorable than first expected, we remain encouraged by improving customer unit economics, ongoing share gains, and still sizable cost savings opportunities."