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The Street
The Street
Patricia Battle

Wayfair CEO flags alarming change in consumer behavior

Wayfair is facing some unexpected financial headwinds, and its CEO, Niraj Shah, is calling out the source of the problem.

The home goods company recently revealed in its second-quarter earnings report for 2024 that its U.S. net revenue decreased by $55 million dollars compared to the same period in 2023. Its gross profit, which is how much the company made after costs, also shrunk by about 4.4% year-over-year.

Related: Wayfair CEO sends a harsh wake-up call to employees

CEO says current trends mirror those of past economic crises

In the earnings report, Shah revealed that shoppers are changing how they spend their money, and the trend mirrors consumer behavior that was seen during the 2008 financial crisis.

“Customers remain cautious in their spending on the home, and our credit card data suggests that the category correction now mirrors the magnitude of the peak to trough decline the home furnishing space experienced during the great financial crisis," said Shah.

The Great Recession of 2008 was the worst financial crisis in the U.S. since the Great Depression, which started in 1929. During the 2008 recession, as the unemployment rate spiked due to the country losing 8.7 million jobs, consumers cut their spending and focused on increasing personal savings and tackling debt as they faced financial uncertainties.

A virtual reality app is demonstrated at Wayfair's first store in the Natick Mall in Natick, MA.

Suzanne Kreiter/The Boston Globe/Getty Images

Lack of housing affordability is hurting Wayfair's pockets

During a recent earnings call, which discussed Wayfair’s latest earnings report, Shah said that new home sales in the U.S. have tumbled by 20% during the first five months of 2024 compared to the first five months of 2021, and existing home sales have declined by over 30%. Both of these trends, he claims, are having a negative impact on the company’s sales.

“While you've seen many of our peers that are impacted by housing declined to an even greater degree than Wayfair, at the end of the day, with housing turnover levels that haven't been as depressed since the great financial crisis, the market fatigue weighs on everyone in the category, ourselves included,” said Shah.

Related: The affordable housing crisis has hit Home Depot where it hurts

Currently, U.S. home prices are on the rise, which is chipping away at housing affordability. Since the second quarter of 2020, home prices have increased by 28%, and consumers have been pushing back. 

Mortgage applications decreased by 3.9% just last week while mortgage rates remained at almost 7%, according to a weekly survey from the Mortgage Bankers Association.

Shortly after Wayfair released its earnings report, its stock price declined by roughly 8%.


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Wayfair’s decline in earnings comes after Shah sent a memo to employees in December last year informing them that they “still have some work to do” to fully bounce back as a company.

“Working long hours, being responsive, blending work and life, is not anything to shy away from,” wrote Shah in the email. “There is not a lot of history of laziness being rewarded with success. Hard work is an essential ingredient in any recipe for success.”

Related: Veteran fund manager picks favorite stocks for 2024

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