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Speaker 3: Another stock that's been rallying in a big way today,
Speaker 3: in fact, up about eight and a half percent at
Speaker 3: its highs is Wayfair stock right now still again about
Speaker 3: three and a quarter percent, rallying after earnings. Results came
Speaker 3: in better than expected as consumers brought forward spending while
Speaker 3: suppliers are holding back from price increases. We should put
Speaker 3: out the stocks off about thirty percent year to date.
Speaker 3: Kate Gulliver is the chief financial officer at Wayfair, which
Speaker 3: delighted to have her back with us. She joins us
Speaker 3: once again from Boston. Kate, how are you and how
Speaker 3: is your environment? It's been about a month since we
Speaker 3: last talked. How has it changed?
Speaker 4: Yeah, you know, great question. I guess i'd just start
Speaker 4: with first, you know, the printed this morning. We feel
Speaker 4: great about the quarter, the strength and the top line,
Speaker 4: frankly in the US segment, and ultimately the flow through
Speaker 4: to adjusted EBITDA, you know, the enduring strength in the business. So,
Speaker 4: you know, we feel like we're on very solid ground
Speaker 4: right now.
Speaker 1: We saw earlier and even earlier this week as well
Speaker 1: from companies such as Meta Platforms, but mostly Microsoft. And
Speaker 1: then of course with the GDP figure that companies and
Speaker 1: people are pulling purchases forward. I'm curious what you saw
Speaker 1: on the platform over the last month in terms of
Speaker 1: what customers are buying, how they're buying it, and how
Speaker 1: that behaviorist may be changed.
Speaker 4: Yeah, it's a great question. You know, we shared on
Speaker 4: the call this morning. There's one category where we have
Speaker 4: seen some pull forward of demand, and that's an appliance
Speaker 4: is So you know, we don't do a large business
Speaker 4: and appliances. We've gone to that business a few years ago.
Speaker 4: But that category we have seen what we would call,
Speaker 4: you know, a pull forward of demand. We actually have
Speaker 4: not seen a pull for demand in sort of the
Speaker 4: core furniture part of the business. You know, we look
Speaker 4: at this on a variety of different metrics around you know,
Speaker 4: search volumes, traffic version, et cetera. And from everything that
Speaker 4: we're seeing you know, over the past month to your question,
Speaker 4: we've not really seen you know, any discernible pull forward
Speaker 4: on the furniture business really just on the appliance part,
Speaker 4: and the appliance part is a very small part of
Speaker 4: our business in total. And obviously, you know, the last
Speaker 4: month that you're referred to, you know, would be post
Speaker 4: the quarter that we've posted this morning, which ended on
Speaker 4: March thirty.
Speaker 1: First, is that lack of pull forward a sign at
Speaker 1: all to you of a lack of confidence that the
Speaker 1: consumer has in their situation right now? Is it concerning
Speaker 1: to you? These are obviously big purchases, we're talking furniture here.
Speaker 1: If consumers don't feel comfortable buying those, then they might
Speaker 1: not buy.
Speaker 4: Yeah, great question. So you know, first, our average AOV
Speaker 4: is about three hundred dollars, right, so we sell range
Speaker 4: of products and the average ticket size of about three hundred.
Speaker 4: We did say actually the demand had been quite healthy
Speaker 4: in in April quarter to day period, and so we
Speaker 4: feel very good about where demand is. I do want
Speaker 4: to point out that our category, you know, we're hearing
Speaker 4: a lot of noise in the consumer and certainly something
Speaker 4: that we're following very closely and you know, monitoring quite thoughtfully,
Speaker 4: but we are in our category, we've been in a
Speaker 4: position where our category has actually been down for multiple
Speaker 4: years in a row at various points from sort of
Speaker 4: twenty you know, back half of twenty one to current
Speaker 4: you know, our category has been down double digits during
Speaker 4: some of that time. Over this last quarter, you know,
Speaker 4: we still saw the category under pressure in the US.
Speaker 4: So we're talking about a category you know that his
Speaker 4: head actually sort of a negative consumer impact for some
Speaker 4: time after obviously a big pull forward in the beginning
Speaker 4: of COVID.
Speaker 3: Well, that's interesting, yeah, exactly right there, I mean COVID
Speaker 3: was crazy, right. I'm assuming we all talked about everybody doing,
Speaker 3: you know, buying for their home because they were living, working,
Speaker 3: doing everything in their home. Does the environment feel well
Speaker 3: after a couple of years of things being pulled back,
Speaker 3: does it feel more normal? How do you describe today's environment,
Speaker 3: especially Kate, when we talked to so many leaders and
Speaker 3: heads of companies where you know they're using the word uncertainty.
Speaker 3: You've got you know, as Tim mentioned, you know, companies
Speaker 3: giving out dual earnings outlooks depending on what happens out
Speaker 3: of the White House and in terms of terrorf So
Speaker 3: I'm just curious how you would kind of describe it.
Speaker 4: Yeah, it's a great question. So maybe to start with
Speaker 4: our category and some of the evolution of our category
Speaker 4: over this period. To your point, we had significant pull
Speaker 4: forward in the category in the COVID time, right, so
Speaker 4: in the sort of twenty twenty twenty twenty one time.
Speaker 4: Since then, the category has been down consistently since then.
Speaker 4: And actually when we look at the data, if you
Speaker 4: were to take a normalized growth rate from twenty nineteen
Speaker 4: to now, you know, typically is a category that grows
Speaker 4: somewhere on the order of three to four percent a year.
Speaker 4: If you were to sort of straight line that out,
Speaker 4: we're quite a bit below where the trend line is.
Speaker 4: We actually think on a basis or on a sort
Speaker 4: of total sales basis for the category, the category itself
Speaker 4: is actually below you know, starting to be below twenty
Speaker 4: nineteen levels, right, So we're seeing a category that has
Speaker 4: historically been over the last few years quite depressed, which
Speaker 4: may be different than you know, some of the other
Speaker 4: consumer discretionary categories that the folks are referring to. That said, yes,
Speaker 4: it's it's absolutely an uncertain environment. This category. Well, it's
Speaker 4: not down as much as it was in sort of
Speaker 4: twenty two to twenty three. It was still down the
Speaker 4: last quarter. So our focus then becomes on share gain, right,
Speaker 4: So if the category is uncertain, if the overall consumer
Speaker 4: environment is uncertain, what we want to do is make
Speaker 4: sure that we're gaining share. We've done that consistently every
Speaker 4: quarter since the fourth quarter of twenty two, and that
Speaker 4: we're doing that in a very cost discipline way. And
Speaker 4: that's where you've seen us grow our margins and adjusted
Speaker 4: EBITDAD dollars throughout that period as well. So you know,
Speaker 4: certainly there's a lot of noise out there, there's a
Speaker 4: lot of uncertainty within that. We're trying to control what
Speaker 4: we can control, and to us, that results in share
Speaker 4: gain and you know EBADUG growth.
Speaker 1: Hey, Kate, I think I think it's fair to say maybe
Speaker 1: not all customers know that you're a marketplace. You don't
Speaker 1: necessarily have inventory when people are looking at the Wayfair platform,
Speaker 1: but you have relationships with all of these suppliers and
Speaker 1: you have many suppliers. But I want to ask you
Speaker 1: to characterize what you're hearing from these suppliers because they
Speaker 1: are the ones who are affected by tariffs. Such a
Speaker 1: small portion of this stuff is actually made in the US.
Speaker 1: What have the conversations been like with the largest folks
Speaker 1: on your platform? What are they saying?
Speaker 3: Yeah, my understanding is something like more than twenty thousand
Speaker 3: suppliers that you're working with.
Speaker 4: Yes, that's exactly right. So I appreciate that you know it.
Speaker 4: And to your point, you know, mostly to the consumer,
Speaker 4: it reads like a retailer. On the front end, you're
Speaker 4: absolutely right in terms of the dynamic. But on the
Speaker 4: back end you have the benefits of a marketplace and
Speaker 4: we do think that is a benefit to us during
Speaker 4: this time because we work with over twenty thousand suppliers
Speaker 4: from around one hundred different countries including the US. There
Speaker 4: is some you know, domestic manufacturing in this space, but
Speaker 4: you know, we work with suppliers from all over the
Speaker 4: world world. These suppliers range in size, you know, they
Speaker 4: have a wide range of categories that they're involved in.
Speaker 4: In those categories all have different dynamics. I will point
Speaker 4: out that no single supplier comprises any meaningful portion of
Speaker 4: our sales. So you know, from a sales perspective, the
Speaker 4: suppliers are quite diversified, and what we are focused on
Speaker 4: with our suppliers is partnering with them right now to
Speaker 4: have conversations around what levers are at their disposal depending
Speaker 4: on you know, how the environment works from here and
Speaker 4: to us, that means helping them understand, you know, where
Speaker 4: we're seeing demand, what we're seeing in terms of price elasticity.
Speaker 4: So if they were to change whole sales, what does
Speaker 4: that resultant from a price elasticity perspective, and how might
Speaker 4: that impact them in their given category. Many of our
Speaker 4: products are highly substitutable, So you know, let's take this
Speaker 4: chair I'm sitting on right now. We probably sell miniature
Speaker 4: quite similar to this chair. So if you're a supplier
Speaker 4: and you raise price in that category, you could be
Speaker 4: at a dis advantage. Then somebody else has been able
Speaker 4: to maintain a more cost efficient wholesale and so that's
Speaker 4: something we help the suppliers understand and you know, share
Speaker 4: information with them on. We also talk them through what
Speaker 4: other levers they have. During a time where you might
Speaker 4: have some you know, demand disruptions, how do they think
Speaker 4: about leaning in and using our three pl program called
Speaker 4: castle Gate to be able to get inventory, you know,
Speaker 4: into the country. We actually did talk about in the
Speaker 4: first quarter some whole forward of inventory into the castle
Speaker 4: Gate network to land ahead of you know, tariff conversations.
Speaker 4: How do they think about posts, how do they think
Speaker 4: about supplier advertising or retail media. So all of these
Speaker 4: are tools in their toolkit, and our focus is really
Speaker 4: partnering with these suppliers so they're getting the same information
Speaker 4: that we're getting and we're helping to think through, you know,
Speaker 4: these different levers and what is best to pull.
Speaker 3: When I am curious in terms of the consumer, you
Speaker 3: said that they bought a lot of appliances. That's a
Speaker 3: smaller part of your business or small part that they
Speaker 3: weren't pulling forward in terms of furniture. Is that I mean,
Speaker 3: I don't know if you understand this world more than most,
Speaker 3: And I'm just curious. Do you think consumers we've talked
Speaker 3: about we're seeing consumer sentiment. We've all seen the numbers
Speaker 3: that sentiment, and then there's actual actions. Do you think
Speaker 3: the consumer is slowing down? The consumer is stressed right now?
Speaker 4: Yeah? You know, I won't I guess I won't speak
Speaker 4: to the consumer broadly. I can tell you what we're
Speaker 4: seeing in the category. The category itself was down in
Speaker 4: Q one, right, So we look at a variety of
Speaker 4: different panels for the category, you know, various credit card panels.
Speaker 4: We also talk to suppliers because we work with twenty
Speaker 4: thousand of them, so we have a pretty good read
Speaker 4: on what's happening with the category as a whole. And
Speaker 4: when we look at the US four Q one, the
Speaker 4: category was down. Now in our case, that's a continuation
Speaker 4: of a trend that's been going on for quite some
Speaker 4: time in the category, you know, as I said, has
Speaker 4: been down since you know, sort of let's say, back
Speaker 4: half of twenty one. So the category itself has remained
Speaker 4: under pressure. We haven't seen an alleviation you know, of
Speaker 4: that pressure. That said, we feel good about our navigating
Speaker 4: through that and our ability to continue to gain share
Speaker 4: in that environment.
Speaker 1: How do you see that holding up if tariffs remain
Speaker 1: in effect or if we don't see if we don't
Speaker 1: see one hundred and forty five percent tariff come off
Speaker 1: of China.
Speaker 4: Yeah, you know, I go to the dynamic of the
Speaker 4: marketplace and what we're really focused on driving there, which
Speaker 4: is helping suppliers understand the competitive dynamics and our ability
Speaker 4: to work with suppliers from all over the world. So
Speaker 4: certainly we work with supplier from China, but we work
Speaker 4: with supplier India, Turkey, Brazil, Southeast Asia, Mexico, the US,
Speaker 4: right everywhere. And so what you'll see happen, you know,
Speaker 4: as different teriff rates evolve, is suppliers want to be
Speaker 4: quite prudent in making sure particularly because frankly, demand has
Speaker 4: been so slow for them over the past few years.
Speaker 4: How do they be thoughtful about you know, if and
Speaker 4: when they modulate prices and if and when they modulate
Speaker 4: you know, availability, because what they want to do is
Speaker 4: maintain share some cases, you know, if they see an
Speaker 4: opportunity gain share within a category that they sell on us.
Speaker 4: And this is where the substitution helps because if one
Speaker 4: specific geography or region is more impacted than another, you
Speaker 4: can see that other reason will actually start to take share. Right,
Speaker 4: so suppliers that actually are not disadvantage from a price
Speaker 4: perspective will take share within you know, see this chair category.
Speaker 3: All right, So it sounds like glass more half full
Speaker 3: in terms of the outlook, I'm just trying to gauge.
Speaker 3: I mean, it does sound like your suppliers have a
Speaker 3: lot of move But give us an idea if you
Speaker 3: had to use a word to kind of describe the
Speaker 3: environment today. You have such a great read on the
Speaker 3: consumer and spending just as we wrap up what would
Speaker 3: be that word, But.
Speaker 4: You know, it is a very fluid environment, and our
Speaker 4: focus is on controlling what we can control, and we
Speaker 4: think we're set up quite well to continue to offer
Speaker 4: our consumer to the best value. And you know, that's
Speaker 4: the best that we can do during this time deliver
Speaker 4: for our consumer, and we feel in partnership with our suppliers,
Speaker 4: we're going to be able to do that. And we're
Speaker 4: set up on a nice cost structure and a nice
Speaker 4: balance sheet to be able to continue to deliver that
Speaker 4: going forward, and.
Speaker 3: Your suppliers to feel confident about being able to navigate
Speaker 3: kind of all this craziness that's going on.
Speaker 4: Yeah, I mean, certainly, you know, we want to partner
Speaker 4: with them to help them because there is a lot
Speaker 4: of noise out there, and so we're trying to help
Speaker 4: them sort of navigate through this. But you have suppliers
Speaker 4: a range of scale, a range of sophistication, a range
Speaker 4: of geographies that they work in, and you know, we
Speaker 4: feel good about our ability to help them navigate through.
Speaker 3: All right, So enjoy it, Kate, thank you so much.
Speaker 3: Be well, Kate Olliver, She's.
Speaker 4: Nice to talk to you again.
Speaker 3: Same here. She's the chief financial officer over at Wayfair.
Speaker 3: As we mentioned, their stock definitely popping and out performing
Speaker 3: the overall trade today, up as much as eight and
Speaker 3: a half percent right now tim with about a three
Speaker 3: and a quarter percent game