Wayfair Inc Q4 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Paul Forbes - Guggenheim Securities, LLC, Research Division - Analyst : Niraj, you mentioned Wayfair.com, I think, was down mid-single digits in the fourth quarter. So can you provide more specific color on Wayfair.com during, I guess, quarter-to-date in the first quarter and then just provide sort of specifics on when the business will cycle the catalog changes within the specialty banners? Niraj S. Shah - Wayfair Inc. - Co-Founder, Co-Chairman, President & CEO Sure, Steven. Let me try to add a little color. So kind of what I described B2B and Perigold growing nicely, Wayfair.com doing better than the total and then the drags being international and SRBs, those statements are still true in the first quarter. So I don't want to provide exact specific numbers for each of those, but those are -- those statements are all true. And the SRBs, they're a relatively small share of the total business, but because of the repositioning and the changes we're making, they're down substantially. But what will happen is as you get into the back half of this year, you're actually going to see that flip. And then as they grow, you'll see them actually be comping up very possibly. That's one of the things that makes comps right now really difficult is actually the shape of the year last year where you have COVID tailwinds in the first half and you have normalization happening in the second half, they make the comps this year look unusual. And I think Michael has said, hey, if you roll forward just a normal seasonal pattern, don't even account for all of the things that we're specifically doing that should drive outsized performance, you actually get to a very nice positive comps in the second half of this year. And so one of the things that you have when you talk about the first quarter is, you're anniversary-ing these steep COVID comps from last year two rounds of stimulus, et cetera, but we're not that many months away from where that all is behind us. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 24, 2022 / 1:00PM, W.N - Q4 2021 Wayfair Inc Earnings Call

Question: Anna A. Andreeva - Needham & Company, LLC, Research Division - Analyst : We have two quick questions. So the number of active customers took a pretty big step down in the fourth quarter. How do you think about new customer growth in '22? And what are you seeing from your 2020 cohorts in terms of retention and buying behavior? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 24, 2022 / 1:00PM, W.N - Q4 2021 Wayfair Inc Earnings Call And as a follow-up on gross margins, you mentioned the low end of the 27%, 28% range appropriate for the first quarter. What's implied for gross margin and your guidance for the year for the adjusted EBITDA slightly profitable? Niraj S. Shah - Wayfair Inc. - Co-Founder, Co-Chairman, President & CEO Great. Let me start -- Anna, thanks for the question. Let me start with answers and then maybe I'll let Michael jump in with any additional thoughts yet. On the active customer count, I just want to clarify that the active customer count would be any customers who have placed an order within the last 12 months. So when we talk about the 4 billion visits, they're coming from a large, large number of customers that's in excess of the active customer number. But if they haven't made a purchase in that period, they drop out of that number. even if they're very engaged. And so the active customer number, you're still seeing the normalization happening from the peak of COVID. So that 27 million number, what you're noting is it's down from 29 million in the quarter before. I'll just remind you, in Q1 of 2020, as we entered COVID, we had 21 million. So it's up 30%. It's up 6 million from then. And then again, the number that are engaged is a far larger number. That's the number that made the 4 billion visits in total. So we feel pretty good about the trajectory. The next thing I would just say is when you talk about growing the active customer count, that customer count, there's far more customers to get than we have already, and we know that. We do survey work regularly to understand their awareness of us and their preference for us. And one of the things that the annual shareholder letter, which we just released today as well, if you read that, one of the things I just talked about is the awareness amongst people who purchase from us, and then that resulting in their likelihood to come back is incredibly high. The -- that awareness from those who don't -- have not yet purchased from us is very, very different. And so in CPG, people talk a lot about trial. There's a new type of cookie. And so pre-COVID, they have someone on the street corner handing out a little sample packages because they want you to try it. Because if you try it, you might decide you like it. If you like it, you'll then go back and buy it over and over again. And this is the opportunity we have where as folks try us, so they visit the site, they find something they like, they buy it, they get that item. That really create -- that's the beginning of that flywheel where then they're coming back over and over again. And there's just so much runway on the repeat side. And as you know, repeats over 3 quarters of the business, it's the reason we grow so quickly. So we think there's just a lot of room with all the enhancements we're making that the conversion will keep rising. And as people are visiting the site, as macro traffic grows, we're just going to keep getting new customers. So we don't think that, that is at all risky. We think that just keeps playing out over time. The second part, which you asked a quick question on about gross margin and the guide for the first quarter, it was the same range we've had for a while, 27% to 28%. And as I highlighted, that rate will go up over time, and that range is up from the 24% to 25% we were at for quite some time. Your question was what is it for the year. I'm going to let Michael field what is it for the year because we generally don't give a lot of discussion. What I will say is what it is over time is it's going to actually keep rising quite nicely. But where we are right now is what we were highlighting, and that has to do with the fact that even though we pass on inflation, what we don't do is pass on transitory costs that we think will correct. And so in times where we absorb some of that for a short period of time, that can hit that number a little bit, which is why this quarter, we sit at the low end of that range. But Michael, do you want to chime in on the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 24, 2022 / 1:00PM, W.N - Q4 2021 Wayfair Inc Earnings Call