Sales Growth Outlook
Q: How are you feeling about the 15%+ sales CAGR target today?
A: Management remains confident in achieving significant double-digit sales growth over time. Despite market challenges, they're capturing excess market share through initiatives across various segments like luxury (Perigold), B2B, and international markets. They believe they can scale profitability while investing in growth, noting that many investments aren't yet reflected in growth rates. -

Supplier Services & Margins
Q: Have supplier services and advertising grown and contributed to gross margin?
A: Supplier services, such as advertising, can grow independently of revenue and enhance gross margin. Advertising was around 1% of revenue as of last August, with significant growth potential. The focus has been on improving supply and supplier engagement. Suppliers are keen to invest in Wayfair's platform, leveraging promotions, pricing strategies, logistics integration, and advertising services. - -

International Profitability
Q: What's the path to profitability in international markets?
A: Wayfair is gaining market share and improving unit economics in international markets like Canada, the UK, and Germany. Cost reductions over the past 18 months have positioned them well. While fixed costs and corporate overhead allocations affect profitability, they feel optimistic about the trajectory, with EBITDA losses roughly halved in the trailing 12 months. -

Brand Campaign Impact
Q: How much of the brand campaign spend is reallocated from performance channels?
A: The brand campaign includes a shift toward under-utilized channels like social media and streaming, but overall advertising spend remains consistent. They're ensuring a strong payback and return on media mix. While early results are promising, the full impact of brand campaigns unfolds over quarters and years. -

Physical Stores Contribution
Q: Can you contextualize potential sales from the new large-format store?
A: Wayfair is excited about launching its first large-format store, a 150,000 square foot location opening on May 23 in Wilmette, near Chicago. They're methodically opening a few stores to refine unit economics before scaling up. They measure the halo effect by analyzing sales lift in the store's trade area compared to markets without a store. Specific sales projections weren't provided. -

Customer Acquisition & Repeat Orders
Q: Orders from new customers seem soft; how are you reengaging lapsed buyers?
A: Wayfair sees strong momentum with both new and repeat customers, averaging around 2 million new orders per quarter despite economic challenges. Initiatives like the upcoming loyalty program and brand campaigns aim to deepen relationships with existing customers and attract new ones, encouraging frequent purchases. -

Average Order Value Trends
Q: AOV was down slightly; what's the trajectory ahead?
A: Recent AOV fluctuations were due to COVID-related inflation and subsequent deflation. With those factors behind, AOV is returning to normal seasonal patterns and category mix influences. Future changes will be driven by product mix rather than the extreme swings seen during COVID. -

Use of GenAI & Productivity
Q: Can you discuss Wayfair's use of GenAI and productivity gains?
A: Wayfair is integrating GenAI across departments like technology development and sales tools. Staying at the forefront of tech innovation helps enhance efficiency, potentially boosting margins over time. They're exploring exciting opportunities in digital merchandising to improve the consumer experience. -

Seasonality & Sales Trajectory
Q: Should we expect positive sales in H2 based on seasonality?
A: Due to last year's significant deceleration, comparisons should be easier in the second half if there's no major macro slowdown. Management is optimistic about sales trajectory, continuing to gain market share, and focusing on delivering excellent offerings to customers. However, macroeconomic factors could influence outcomes. -

Macro Replenishment Cycle
Q: Is there a potential replenishment cycle ahead for the industry?
A: There is a replacement cycle for their products, varying by type. The category is currently in a down cycle, which is typically followed by an up cycle. While timing is uncertain due to factors like interest rates and consumer sentiment, Wayfair focuses on gaining market share by offering better value and service, positioning themselves to benefit as the macro environment improves. -

Promotions Impact on Sales
Q: Do only one-third of sales during promotions come from discounted items?
A: Yes, promotions drive significant site traffic, and while customers view promoted items, they often explore further and purchase preferred items. The majority of sales come from non-promoted items in the aisles, a dynamic that has consistently held true. -

EBITDA Margins Expectations
Q: Have incremental margin expectations changed with revenue upside?
A: The framework of achieving $600 million EBITDA on flat revenue remains valid. Incremental margins are expected in the mid- to high teens range. Spending plans haven't changed with potential revenue upside; previous assumptions still apply. -