Wayfair Inc. Reports Surprise Second-Quarter Profit

Shares of Wayfair Inc. (W) soared 14.7% in premarket trading Thursday, reaching a 15-month high. The home furnishings online retailer delivered a surprising second-quarter profit, as increased gross margins helped offset declines in revenue and active customers.

Strong Financial Performance

Net losses for the second quarter narrowed to $46 million, or 41 cents a share, compared to $378 million, or $3.59 a share, in the same period last year. After excluding nonrecurring items, adjusted earnings per share stood at 21 cents, surpassing the FactSet per-share loss consensus of 73 cents.

Although revenue fell by 3.4% to $3.17 billion, it still exceeded the FactSet consensus of $3.10 billion. The number of active customers also saw a decline of 7.6% to 21.8 million, with orders per customer dropping slightly from 1.85 to 1.82. However, net revenue per active customer over the last 12 months increased by 1.5% to $545, and orders delivered expanded by 3.0% to 10.3 million.

Improved Gross Margins

One of the key factors contributing to Wayfair's positive performance was the improvement in gross margins. Gross margin, which represents gross profit as a percentage of revenue, rose from 27.3% to 31.1%.

Robust Market Performance

Year-to-date, Wayfair's stock has experienced an astounding growth of 121.6% through Wednesday, outperforming the S&P 500, which advanced by 17.6%.

Wayfair Inc.'s unexpected profit amidst declining revenue and customer base showcases their ability to adapt and thrive in challenging market conditions.