By Sabrina Escobar

Wayfair posted a surprise profit for its fiscal first quarter and topped sales expectations, bucking immediate concerns over how tariffs will affect the furniture industry.

The home furnishings retailer posted adjusted first-quarter earnings of 10 cents a share, far better than consensus estimates for a loss of 21 cents a share, according to FactSet. The adjusted figure doesn't factor in certain one-time costs, including restructuring charges related to ongoing efficiency efforts and the company's decision to shut down business in Germany. On an unadjusted basis, the company reported a loss per share of 89 cents, narrower than projections for a 99-cent loss per share.

Revenue was $2.73 billion for the quarter ended March 31, close to flat from a year ago and slightly better than consensus estimates for $2.71 billion. Sales in the U.S. ticked up 1.6% from a year ago to $2.4 billion.

"We've been navigating a very complicated environment for many years now, and we've improved our profitability dramatically, we've taken consistent share even while the category has been under pressure, and we've improved our balance sheet and cash position," said Kate Gulliver, Wayfair's chief financial officer, on a call with Barron's. "I think that sets us up quite well for the complexities in the current environment."

The company doesn't provide full-year guidance, but plans to give investors an update about the current quarter during its earnings call scheduled for 8 a.m. Eastern today.

Tariff fears have weighed on Wayfair's stock this year. A good chunk of the furniture sold in the U.S. is produced abroad -- China and Vietnam alone accounted for nearly 50% of total furniture imports in 2024, according to data from the U.S. International Trade Commission.

Shares are off 32% as of Wednesday's close compared with the S&P 500's 6% loss. The stock closed 3.3% lower at $30.16 Wednesday afternoon.

Wayfair doesn't give a country-by-country breakdown of where it sources its products, Guliver said, but she noted that the company works with over 20,000 suppliers in 100 different countries, including the U.S.

Because of Wayfair's marketplace model, the company itself doesn't buy or import its merchandise -- suppliers do, and they will be the ones to ultimately decide how to deal with the higher levies. On Wayfair's end, the company's search algorithm will find better-value products and display them more prominently in search results. Value is often a combination of availability, product quality, speed of delivery, and pricing, Gulliver said.

Gulliver didn't specify whether she thinks furniture prices could move higher in response to the tariffs. Suppliers set wholesale prices, not Wayfair, and they can choose to pass on tariff-related price increases to consumers. That said, the company is working with its vendors to help them understand how price increases could affect sales, given that there are often many similar products sold on the marketplace from different suppliers.

"Because of the competitive dynamic in the marketplace model, what we try to help suppliers understand is that moving around that wholesale [price] will have an impact on their share, because again there are probably many folks selling wood bar stools," Gulliver said.

Many suppliers chose to ship merchandise into the U.S. ahead of the tariffs, she added. Wayfair's inventories were $90 million at the end of the quarter, up from $76 million in December. Although Wayfair doesn't own its merchandise, it does record inventory charges when products are shipped out of its warehouses or get returned.

Wayfair is also expanding its international business, which wouldn't be subjected to U.S. import levies. The company said in January it was closing its business in Germany to focus on more profitable growth areas, including expanding in the U.K., Canada, and Ireland, as well as opening more bricks-and-mortar stores.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 01, 2025 07:00 ET (11:00 GMT)

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