Wayfair (W) has had a challenging few years, just like many other home goods retailers across the country.
As home prices in the U.S. remain high, and the housing turnover rate remains the lowest it’s been in 30 years, with the average 30-year mortgage rate being above 6%, consumers have deprioritized home goods spending, especially on large discretionary home projects such as kitchen and bath remodels.
💰💸 Don’t miss the move: Subscribe to TheStreet’s free daily newsletter💰💸
“The home goods industry is inherently cyclical, but the past few years have been particularly volatile,” said Wayfair in a recent letter to shareholders. “A confluence of macroeconomic factors – shifts in discretionary spending post-pandemic, supply chain disruptions, and historically high mortgage rates – have significantly impacted the housing market and, in turn, our category.”
Related: Walmart dupes another ‘luxury’ product, and it’s causing drama
Wayfair suffers steep losses during holiday season
In Wayfair’s fourth-quarter earnings report for 2024, the retailer revealed that amid these recent challenges, its total net revenue only increased by 0.2% year over year during the quarter. It also faced a net loss of $492 million.
Even during a bustling holiday season last year, Wayfair saw the amount of orders its repeat customers placed during that time period decrease by 5.6% year over year.
The number of its active customers also dipped by 4.5% compared to the same time period last year, falling short of analyst estimates.
Despite these decreases, the average amount of money customers spent per order was $290, which is $11 higher than the average amount they spent during the same quarter in 2023.
The drastic change in customer behavior comes after Wayfair unveiled its new Wayfair Rewards program, which launched on Oct. 22. The program encourages customers to make more than three purchases a year.
The program costs $29 annually, and it grants customers access to benefits such as 5% back on purchases, free shipping on all orders, access to exclusive shopping events, special offers, and a members-only support line.
Related: Wayfair hopes to win back customers with new offer amid low sales
During an earnings call on Feb. 20, Wayfair CEO Niraj Shah said that the program is “going as expected,” but the company will advertise it more heavily going foward.
“We’ve gotten sign-ups at a nice pace, but we’ve not aggressively marketed yet,” said Shah. “So now what you’re going to see is you’re going to see it on the site highlighted more.”
The move from Wayfair comes after some of its customers over the past few years have been complaining about encountering inflated prices for items on the company’s website. So it is no surprise that Wayfair is relying on its new Rewards program, which focuses on affordability, to attract more customers.
Shortly after the company revealed its latest earnings on Feb. 20, its stock fell by roughly 3%. Wayfair’s stock is currently down about 9%.
Wayfair isn’t the only victim of low sales
Wayfair isn’t the only home goods retailer that has recently been struggling with sales. The company’s main competitors, Lowe’s and Home Depot, have also flagged that their customers have grown more cautious about spending money in their stores.
In Lowe’s third-quarter earnings report for 2024, which was released in November, the retailer revealed that its total sales during the quarter declined by almost 1.5% year-over-year.
More Retail:
- Target’s latest policy change sparks massive boycott threat
- Bounty, Tide, Dawn owner issues stern warning about its pricing
- GameStop makes a drastic move amid weak sales
During an earnings call on Nov. 19, Lowe’s CEO Marvin Ellison said that while interest rates have recently decreased, consumers are continuing to face other economic pressures that are causing them to hold on to their cash.
“While interest rates are beginning to drop, consumers continue to face affordability challenges as both inflation and interest rates are putting pressure on their wallet,” said Ellison.
In Home Depot’s third-quarter earnings report for 2024, the retailer revealed that its comparable sales in the U.S. decreased by 1.2% year-over-year during the quarter. Also, the average amount of money customers spent for each purchase shrunk by almost 1%.
“The number one issue that people were citing in our surveys were general macroeconomic and even political uncertainty,” said Home Depot Chief Financial Officer Richard McPhail during an earnings call in November.
Both Lowe’s and Home Depot are expected to report their fourth-quarter earnings next week.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
