00:00How are you?
00:02You know, Carol, we feel great about the quarter that we printed.
00:06I think we're very focused on the fundamentals, and are we doing two things?
00:10Are we expanding our share gains in a category that, you know, as your team covered, is complex right now
00:17and challenging?
00:18And are we expanding our profitability?
00:19And we're doing both.
00:21So in that, you know, print on Q1, we showed that 7.4% net revenue growth.
00:27We think that's on a category that was down sort of low singles, so a really nice share spread to
00:32the category.
00:32And then you saw a really strong flow through to EBITDA.
00:36That was our highest Q1-adjusted EBITDA margin since 2021.
00:39And so I think you're really seeing the strength of the model there.
00:42So we feel great about the quarter.
00:44Kate, I just want to say, first of all, thank you for getting the memo so that we kind of
00:47match here.
00:48I'm really happy about that.
00:50I love it.
00:51Blue is the theme.
00:52Cerulean, you know.
00:53I love it.
00:54I love it.
00:54Hey, listen, one of the things I wanted to ask you about, you've been at Wayfair for more than a
00:58decade.
00:59You're interim CFO, CFO since May of 2022, after those heady and exuberant days of the pandemic.
01:06Tough time, we know, for the global economy, the U.S. economy.
01:09But everyone was buying so much for their homes.
01:13And then we had that reset.
01:14And I think we've all now can look back at that time and say that was the anomaly.
01:18That was the unusual time.
01:20We've seen the reset.
01:21You've seen your share of cycles, though, I guess is what I want to point out, too.
01:25Tell us about the consumers right now.
01:27We've been talking about they're in a pinch.
01:29Gas prices are higher.
01:30Other things are higher.
01:31They're holding back.
01:33Tell us about what you saw with the consumer.
01:36Yeah, we do think that in our category, the category is challenged and the consumer is, you know, challenged.
01:41So if we look at Q1, we felt the Q1, the category was down, you know, sort of low single
01:47digits again.
01:48This is on a category that has been down, you know, consistently since 2021.
01:53And actually, if you look at the trend line, so typically this category in a normalized period grows three to
01:59four percent a year.
01:59If you were to CAGR the 2019, you know, period to now and look at that, you know, what that
02:05trend line should have been, we're still far below that trend line.
02:09So even when adjusting for that pull forward, as you spoke to in 2020 and 2021, the category is off
02:15where normalized should be.
02:16And I think that speaks to, you know, a consumer who is challenged right now and not spending as much
02:21on discretionary.
02:22I think what's important, though, is that for us at Wayfair, our focus is less on, you know, when is
02:28the consumer going to recover and when are we going to see those category tailwinds?
02:32We want those.
02:33Those will be fantastic.
02:34It's a cyclical category.
02:35We know it'll come back.
02:36But our own growth is really driven by our share spread to the category and the initiatives that we have
02:41going internally around rewards, Wayfair verified, our physical stores, Paragold, as your, you know, team mentioned.
02:48And those are growing in a really good direction.
02:51And that's what's driving that, you know, mid single digits revenue guide for Q2.
02:55So you're less concerned about potential weakness from the consumer in the current quarter than you are about that being
03:01offset by the tech investments that you're making?
03:06Yeah, so our guide for the current quarter does not contemplate any improvement in the category dynamics.
03:12So we're, you know, quite confident in hitting that mid single digits revenue, you know, absent any category recovery.
03:19We said on the call, actually, we thought April was down sort of low to mid single digits in the
03:23category.
03:24So the category, you know, maybe further challenge in April.
03:26Even with that, you know, we still are confident in this mid single digits number for Q2.
03:31Hey, talk to us a bit more, Kate, about Paragold.
03:33That's really your luxury online marketplace.
03:36What are you seeing the dynamics and metrics of that marketplace in particular?
03:42Yeah, I think there's been a lot of discussion around, you know, the K-shaped economy.
03:46And certainly where we see that play out is with Paragold, which is, as you pointed out, Carol, our luxury
03:53brand.
03:54We also have our specialty retail brands.
03:56So Joss & Main, Birch Lane, All Modern.
03:59And those play a bit above masks, not quite at the luxury level, but above masks.
04:03And all of those brands are doing quite well.
04:05They're growing very nicely.
04:07Now, those are small brands.
04:09So Wayfair.com has to be growing nicely, too, to get, you know, that 7.4% comp.
04:14But we are seeing strength in the higher end, for sure.
04:17What about when it comes to the pro business?
04:20Yeah, that's a great question.
04:21I appreciate you asking about that.
04:22The B2B business is actually held in quite nicely.
04:25You know, last time we gave a stat on that, I think we said it was around $2 billion.
04:29That's an important category for us.
04:31One, we can continue to grow.
04:32That's a place where I'd say our ability to continue to improve the site has sort of nicely added to
04:39how the consumer engages in that category.
04:41So the pro consumer, for example, wants, you know, consolidated delivery.
04:45All of the products arriving together versus piecemeal.
04:48They want to be able to plan projects on the site.
04:50And these are things that we've rolled out over the last year or so to really help that shopper in
04:55that category who tends to be a designer or a contractor.
04:59So, you know, when we, you know, you're talking about the different aspects of the business, Kate.
05:03And I want to go back to, all right, so some weakness now, you know, in terms of what we
05:09just saw for the last quarter.
05:10But you guys seem to have confidence about momentum for the second quarter.
05:14Is that fair?
05:15Yeah, I think what you're hearing from us is, you know, we know the category is under pressure.
05:20We've been, you know, as you pointed out, we've been operating in a challenging category for a few years now.
05:24And what we're seeing is the benefits of several different initiatives that we've launched over the last year plus really
05:30hitting and combining together.
05:32And that is what is sort of driving this share acceleration.
05:37And, you know, one of the things, too, Kate, I wanted to dig into, we've talked with you about this.
05:41I mean, everybody talks about, you know, housing.
05:44It's not been great, right?
05:46People aren't buying homes.
05:47But the last time we caught up with you, or I think we've talked about it in the past, about
05:51the refresh cycle.
05:53Is that where you're really seeing a lot of activity?
05:56I know we have been in a house for a long time, and we are doing some refresh work overall.
06:02But I'm just curious.
06:04Give us some context and color around that.
06:06Well, I hope you're shopping the sites, Carol, as you're doing the refresh.
06:10You know, it is, I will say, with the category down so much, eventually we do think we'll start to
06:15see some of that refresh.
06:17I think people stay in their home long enough, you know, to your point, and there's a desire to sort
06:21of simplify or improve.
06:24I think we've talked before about categories that have done well during this period are categories that are more, you
06:30know, decorative accents, seasonal decor,
06:33the types of things that you might use in a refresh, whereas the bigger ticket items, the bigger furniture items,
06:40that category has been even, you know, that subsegment of the category has been even more compressed.
06:45You know, within all of that, though, our focus continues to be on the share gains in each of those
06:51sort of subcategories that we play in.
06:53Can you talk a little bit about the calculus or the equation that goes into when someone returns something or
07:03wants something returned?
07:04You have this calculation that says, OK, we can give you a partial refund and you can keep the items
07:10or we'll take a full refund, but you have to pay for shipping and back.
07:14Because we're talking about stuff that isn't as easy as just returning to a store, sometimes not as easy from
07:20a shipping perspective.
07:21Just curious how that equation works and sort of how that hits your your bottom line.
07:25Yeah. So you've actually, you know, introduced a number of the pieces in the in the way that you frame
07:30the question.
07:31You're right. We think about, you know, one, what is the customer experience here? Right.
07:35We customer to have a great experience. Some of these items are very difficult for that customer to return.
07:41So how do we make that easy for her? You know, we actually have opened up a number of outlet
07:45stores across the country where the customer could return the product.
07:48We have two large format Wayfair stores open in Chicago, Atlanta.
07:52The customer can bring the product into those stores or if it's smaller parcel, she can certainly ship that back.
07:57But would she perhaps prefer to, you know, keep the product and not return?
08:01That's always an option. But the focus is really how do we simplify this for the customer?
08:06It's really important for the customer to have a great experience with us, even if she needs to return,
08:11because that's what keeps her coming back and, you know, shopping consistently with us over time.
08:16And I do think it's that trust in the brand and the trust that you're going to have a high
08:20quality experience,
08:21even if you have an issue with the product that, you know, has really been one of our strengths over
08:26the last two decades that we've operated.
08:29In terms of how that impacts the P&L, our returns rate has remained very steady over many, many, many
08:34years.
08:35And what we try to do is actually, you know, prevent returns from the start. Right.
08:39So how do we make the product detail page as rich as possible?
08:43How do we help you understand all the dimensions around that product?
08:46How do we make sure that the imagery is rich and clear?
08:49That's really a place to where AI can accelerate.
08:51We talked about that a little bit on the call today.
08:54AI tools that we're using to improve merchandising, which then, you know,
08:59ultimately over time gives the consumer more conviction in the product and less likely to have a return.
09:03Okay. How is the retail stores doing? How are they?
09:08You guys are, it seems like you're, you're very thoughtful in terms of how you expand and build out.
09:12What can you share with us about that?
09:14You know, we're thrilled with the performance of the Wayfair store.
09:17So the Atlanta store soft opened a few weeks ago, the grand opening or about a month ago,
09:21the grand opening was over a week ago.
09:23That store opened, you know, nicely stronger than the Chicago store, which opened two years ago.
09:28We should expect that, right?
09:29We're obviously going to take the learnings from the Chicago store and incorporate that.
09:33Into new store openings.
09:35But I think it shows the ongoing, you know,
09:37opportunity for folks here to have this omni-channel experience for the consumer.
09:41And I think what we're really excited about the store is we see existing customers coming in
09:46and shopping us in categories that they may not have typically shopped us for in the past.
09:50You know, for example, storage and org, you know, kitchen accessories that they see in the store.
09:56And it's really helpful to understand the breadth of what we offer.
09:58And then we see new customers.
10:01You know, what we've said about the Chicago store is that more than 50% of the customers
10:05buying in the Chicago store are actually new to the customer file.
10:08We have 100 million customer file, right?
10:10So to get new customers at this stage is a really exciting thing
10:13and I think shows the benefit of that incremental channel.
10:16So.
10:16So.
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