W Q3 2026 earnings call transcript, November 4, 2026

Cannot guarantee that any forward-looking statements will be accurate, although we believe that we've been reasonable in our expectations and assumptions. Our 10-K for 2025, our 10-Q for this quarter, and our subsequent SEC filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made today. Except as required by law, we undertake no obligation to publicly update or revise any of these statements, whether

and new customer orders up over 14%, another post-pandemic record. The momentum we have on orders and customers gives us confidence that our share gains are structural because order growth compounds over time while AOV growth does not. We're very excited by the trajectory we're on and we're still in the early innings. Earlier this year, I described the many pistons powering our engine of growth and you're seeing their success in real time as they work in Tanzania.

Rewards program and I now want to round out the year returning to the topic of loyalty and how we think about it across our marketing investments. Over the past two years, we've grown orders faster while spending less on advertising as a share of revenue, which was under 10% this quarter for the first time since 2021. This is even as we've invested more in our brand and channels that are newer to the mix. So today I'd like to spend some time on what has driven that progress, why we believe it lasts and where

something like Wayfair sofa to a search engine. We're up more than 17% in Q3. Every customer who comes to us directly is one we don't need to pay to reach again, which frees up dollars to keep investing in growth. Creators are the clearest example of where we ramped investment. Home is a category made for creator content. A product styled and a real home answers the questions every shopper is asking, which is how it will look in her space. So we built our program around what creators told us they needed, and we treat them the way

and our other higher AOV business lines narrowed. Let me continue to walk down the P&L. As I do, please note that the remaining financials include depreciation amortization, but exclude equity based compensation related taxes and other adjustments. I will use the same basis when discussing our outlook as well. Gross margin for the third quarter was 29.6% of net revenue driven by investments we continue to make into loyalty and the broader customer experience. Customer

here in Q3 was also a function of timing and we would expect this number to come back up in Q4 as we lean in ahead of the holiday season. Selling operations, technology, general, and administrative expenses were $378 million in the third quarter. This came in slightly higher than our guided range as we saw a few one-time costs hit in the quarter including the competition and markets authority settlement in the UK. Reflecting the one-time nature, we fully expect to return to a range of $360 to $370 million next quarter.

We talked at some length about our capital structure priorities on the last call, and part of that included a transition from repurchasing our convertible bonds to repurchasing our equity outright. Q3 marked the beginning of that. We repurchased $60 million of shares at a full offset to the stock-based compensation we paid out in the quarter. The result is a roughly flat share count quarter over quarter. As we discussed, we intend to make this offset a recurring part of our capital allocation strategy while remaining opportunistic to modify when we believe it is appropriate.

is open. Please go ahead. Good morning, everyone. Thanks for taking our question. So my first question is on loyalty. Can you talk about how pleased you are with the level of growth you're getting and the level of, call it gross profit, dollar growth? And Neeraj, is there a way to tell us the level of inning that you are with this? Does this completely change your ability to talk to consumers? It feels like it's only the level of energy.

JP Morgan. Your line is open. Please go ahead. Thanks. Good morning, everybody. I know you don't speak directly to quarter to date, but you did mention momentum. We've seen some other categories at retail slow down based on the data points that we can see. We've had a very highly contested election, the highest midterm spending of all time. You've gas prices up. And so can you talk about what you've seen from the home furnishings market?

Well, Chris, I'm impressed that you can pull a model from 12 years ago that I'm embarrassed to say I was probably involved in developing. So thank you for the callback. But as it speaks to sort of ACNR leverage, clearly we are seeing some nice momentum on ACNR leverage over the past 12 months. And I think a number of the things that you mentioned are helping to drive that. So loyalty. So loyalty. is something that should drive ACNR leverage and structural improvement over time. You know, further order volume growth and repeat growth, to your point, does drive ACNR leverage. And you see that start to show up and repeat order growth has actually grown quite nicely over the last several quarters. Neeraj shared a stat on his call when he was talking about the marketing. Expensing that revenue from or direct revenue associated with direct traffic is up 15% year over year. So you're seeing that momentum and that push that does help give, you know, more structural ACNR leverage. That said, you know, we do see some. So I just want to remind folks that we sort of called out some of the improvements this quarter, you know, maybe hit a little bit better because of the seasonality that we might see in the fourth quarter. And, you know, we noted that obviously in the guide, but over time you have seen that nice engagement there.

Thanks so much. Your next question comes from the line of Oliver Wintermantle with Evercore ISI. Your line is open. Please go ahead.

And so then the question is like, how do you get there? So the strategy of how we get there is what we talked about, right? We believe in the recipe, we believe in programs, we believe in product-led growth. We think these things are really going to do that strategy executed well, we'll get this outcome. So then when you start going to like lines in between on the P&L, those lines have a number of things and trades in them. But ultimately, the way you can tell if you're making the right trades is going to be the combination of, you know, what is that revenue growth and the revenue dollars and what are the profit dollars? And if you're growing the profits faster than you're growing the revenue, your margin rate will continue to tick up. And at that point, our view is what you'd want to do is not worry about the margin rate speed of going up like the, you know, basically the velocity. What you want to worry about is already maximizing the dollars as you go. Because ultimately you want to get to the biggest dollars and the margin rate will keep climbing if you do. Exactly what I said. Well, but if you optimal over optimize for the margin rate, you may end up with less dollars than you could otherwise, right? So you want to do both, which is you're growing the margin rate. That's secondary to growing the dollars. And so you're growing the margin rate while growing the dollar is the maximum amount. And you're doing that by balancing them.

Margin rate contribution with the profit with the revenue contribution times the margin rate, right? And so the lines in between, you know, to our mind, there's always trade offs and we're going to optimize those to get the outcome I described.

Got it. Thank you. And then just on internationally, the last widened to 25 million. So can you maybe talk about what is driving the deterioration there and what needs to change before the U.S. growth initiatives can translate into better international results?

I'll turn to Kate in just a second, but let me just say, you know, I tried to address this in the script. I think the thing to realize is like when we when we talked about how. Because we got our tech cycles back, we were able to focus on programs and focus on product-led growth. There's a little bit of a sequence to that, and we prioritized Wayfair.com as the first place we did that work. So you can see that by like some elements like when did we launch rewards? Like, for example, we launched rewards, you know, a year and a half or more later in our, you know, foreign markets, or there's still programs like Delivery Plus or stores that we have not launched in our other markets. So there's basically a lag associated with the strategy playing out in other markets relative to playing out in the U.S. That's the main point I would make. Yeah, I think New York spoke to the revenue piece. Obviously on the top line, we've long said that the sort of maturity curve is at an earlier state in these markets. And I think when New York speaks to represents how we think that can improve over time as we launch these initiatives. Just loyalty, for example, just launched in the spring in both markets, and we see nice engagement there. Specifically on your point on the EBITDA dollars, I did mention on the call we had a one-time expense on the SOTG&A line that was specific to the UK, the Competition and Markets Authority there.

And so that obviously would have an impact on the EBITDA dollars in the UK this quarter, or in international this quarter rather. Got it. Thanks very much and good luck.

Your next question comes from the line of Maria Ripps with Canaccord. Your line is open. Please go ahead.

Yeah, so I think the market share gains, I mean, ultimately the environment, whether it's a weak or a strong environment, ultimately it's competitive between you and. Your competitors, and so I think it's really about what you're doing that and how does that line up with what customers want relative to what competitors are doing? And so I think I would say it's more structural, right? So in other words, there's things we're doing. On how we reach customers from a marketing standpoint, the things we're doing on how we do delivery, things we're doing around how we provide selection, things around how we help customers have confidence in items around curation. And these things I think would matter whether it was an up market or a down market from a macro standpoint. So in that sense, I would say I think it's I think it's structural and the driver. to expand the share spread to expand the share gains are really the same things I've referenced, right? It's the recipe. It's the programs and it's the product led growth and those things. A number of things I would point out there is you don't necessarily need new ones of those because most of those are things that compound. And so you can continue to execute on that program as you make it stronger and stronger. It has a compounding effect. They also. compound between each other, so there's interplay between each other. Someone joins rewards in the meantime you make they download the app and then in the meantime you're making the app better. In the meantime, you know you figure out new things to do during promotions that are more engaging.

You augment selection in a category right these things all compound on each other. Got it that's very helpful and then you touched on AI partnerships and sort of some of the key developments there, but as product discovery sort of shifts towards like AI agents, how would you expect sort of your customer acquisition strategy to evolve and what are the implications for. marketing efficiency and spending all the time. Yeah. So I, you know, I think AI agents, AI surfaces, that's just an evolution in our mind for our category relative to. You know, properties like Meta or Pinterest or Google from the years past. And the reason I say that is ultimately customers may start their experience any number of places and whether they do it entirely on their own or whether they do it with a friend or whether they do it with an agent. The question is, at what point do they want to. Be more involved in that. So in other words, if they start by working with an agent, if it was a category that's more of a commodity, we'd expect the agent could take quite a lot of agency and execute that all the way through for you. If it's a category like picking out a sweater or. buying a sofa, we think the agent can help you get started. And what the agent would be able to help you be aware of is that wafer has the biggest selection. It has the most editorial content. It has the best price value. It has the fastest delivery, these types of things. And it can then steer you there. But ultimately, we believe that what you're going to find is most customers are really going to want to be the ones who then explore. And the things we.

Can do on our services with the customer, I think a richer experiences than what the agent can do for them. If they want the agent to transact for them, you know, we mentioned we do this with Google today. They could they could do that. We think that's a rare case, which is the same thing Google found with shopping. Or Pinterest found with viable pins and so on and so forth, which is just that customers ultimately, depending on the category, behave differently. And that we just think that that's a common use case. But what you're going to find is that we're going to optimize ourselves in all these places. Optimize ourselves in how we work with agents. Optimize how we're handling how we appear on AI surfaces in the organic results. Optimize how we work in AI surfaces. As the ad products get developed and mature over time and you actually find this be an early partner with all these folks and helping effectively build this product set in all these places just like we've done in kind of all the other products over the years. Got it. That's very helpful. Thank you.

Your next question comes from the line of Michael Lasser with UBS. Your line is open. Please go ahead.

Good morning. Thank you so much for taking my question. As you've seen this growth over the last several quarters, is the nature of the customer or the composition of the basket any different than either what Wayfair has experienced in past cycles or what you've expected? The intention of the question is to try and determine to what degree are customers buying more decor related items and they're going to come back as the furniture element of the category really starts to recover. Thank you so much.

Yeah, I think, I mean, the answer to your question is yes and no. We have such a broad base of customers who all kind of engage, you know, different ways. So, you know, one of the things we've been very excited about, what we've seen, for example, with stores, is that, you know, it does make a much more obvious and a strong source for all these frequency items. You know, what you've referred to, decor, bedding, housewares, and so that's been exciting. You know, and to the earlier question about AOV, that would, for example, draw down AOV, but to your point, it would be more top of mind. We're getting their purchases big and smalls. We're growing revenue per customer per year, and the more top of mind you are, the more you're going to be in line for that big purchase when they get around to it because they're going to think of you as a place to go explore for them. Right, so there's that, but I don't want to make too much of that. Like, you know, what we're doing is we're doing things on every dimension. I mentioned earlier, for example, large appliances. We're growing a large appliances business. There's very few folks who have, you know, selection from LG and Samsung and GE. Electrolux and, you know, the majors, and we're one of a handful. And I think we are particularly well positioned to build that business. Well, that, you know, that's a category we've got to build awareness of. And that's a category that we're actually growing at a very fast rate, but it's relatively small. And that doesn't play into the.

thesis of, you know, focusing on decor. So we're doing both is, I guess, my only point. I don't know, Kate. Yeah, Michael, I just add, because, you know, I enjoyed your piece on the overall cycle and the sort of replacement cycle in the category. You know, I would say right now we don't see the category sort of seeing that yet. Right. And, and again, what we're seeing is our own share gains. Now, those are broad bases. New York pointed it out across a number of different categories. So something like stores. It's driving frequency, but something like our own, you know, initiatives may drive bigger, bulkier items, but it's not as if we're seeing pronounced sort of outperformance in one sector or another. And this is why we go back to the point of AOV being an output, not an input. Because we're not driving, trying to drive pronounced outperformance of one sector or another. We're in fact, you know, sort of trying to drive sort of wholesale share game. And I think we are seeing that.

Understood. Thank you very much for that. My follow up question is, as you look at the drivers of the gross margin in the third quarter, how much of the change was due to what might be termed reactive factors, like consumers getting a discount because of the loyalty program versus more proactive factors such that you are taking some of this outperforming it up performance and working. with your vendors to lower price. And the intention of the question is obviously what your message seems to be as you get into next year, your gross margin might fall below the 29.5% low. wind of the range that you're guiding to this year to just help bring if that is a realistic expectation, the different pieces of what be driving that more proactive that will help future quarters versus reactive. This is a function. of how the model's going to work. Thank you so much. I'm going to turn it over to Kate to answer that, but the one thing I just want to remind you, like what we mentioned earlier, right, is that we intend to grow profit dollars faster.

Then we grow the revenue dollar. So if you think about that, that means margin rate is, you know, holding in there, right? And so again, there's these lines in between, but there's a lot of puts and takes, as you're saying, but I think chaining together a bunch of negative things wouldn't get you the outcome we're talking about. So, Michael, I appreciate the question, because I think it hits on a key point, which is sort of, you know, just highlighted, which is how we're thinking about the interplay across items. And we're really focused on that contribution. And as we've said for a few quarters now, that currently we believe the right place to operate is that sort of 15-ish percent contribution margin. And that will help meet that goal of accelerating EBITDA dollar growth on this multi-quarter view faster than top-line. Or faster than the top-line growth, but also growing the business overall. And so what does that mean from a GM perspective, a gross margin perspective? We said there's a few different ways that we have seen good investment opportunities in gross margin. You did see that show up. I would actually say that loyalty is a proactive investment on our part because we have decided that that as an initiative is really helpful to the overall business. It makes our growth overall more efficient and more profitable because we know that the marketing spend to get those customers back in is significant.

They come more direct. They're more engaged. They buy across categories, actually, as you just mentioned in the first question. And so they have sort of a broader based experience with us, and we think that's going quite well. So we would say that that was, you know, an intentional strategy to sort of overall drive the fly. That drives that even to dollar growth, but then does, yes, have some impact on the gross margin. But the net of all of that is that contribution margin sort of 15 percentage. Very helpful. I hope you guys have a great holiday. Thank you so much. Thank you. You too, Michael. Your next question comes from the line of Peter Keith with Piper Sandler. Your line is open. Please go ahead.

Yeah, we do from time to time. Give updates on programs like loyalty. We're feeling good about the momentum and, you know, overall sort of engagement there. I think there's two pieces that that we're focused on there. One is the members. As you mentioned, we feel like we're on track. That's going well. The second is the engagement of those members. So getting them to, you know, sort of increase that incrementality of spend and, you know, that's going well. It's going well as well.

Okay. All right. Well, we'll pivot over to stores. You know, it's maybe a little early, but you do have the Atlanta and Columbus stores now open. Are those seeing a similar type? Of performance as the Chicago store in its early months. And then related to that, I'm wondering if some of the store success begets more success. In other words, are landlords starting to realize that you guys are driving traffic? Or can become a large tenant? Are you starting to get more calls and better real estate deals as you're looking to expand that real estate pipeline?

Yeah, thanks. I'll make a couple comments and then also Kate can join in at any thoughts she has. So landlords are seeing that our stores draw significant traffic that we've seen them be very keen to get us into their centers. We've continued to stay very disciplined and picky. About which centers we think fit what we want. And we'll also learn, continue to learn a lot about the right size space, the right type of space, the right trade area, the right location in the trade area, the right co-tenancy. And because the landlords are pretty keen to get us, we're able to combine. Sort of getting what we need and the right economics to get the financial outcomes we want. So that's been pretty, that's been a pretty clear signal. As we have more stores open and they're replicable in terms of seeing those strong results. That's the other thing I think the landlords have noticed because they'll, they'll visit multiple locations and they say, okay, oh geez, I said I'm very strong view of what I'm going to get here. And they kind of, there's not a lot of concepts that are growing that there can be draws like this. So yeah, that. It's all going quite well. Yeah, Peter, to your specific question on, you know, how are Atlanta and Columbus performing? We see very similar results in Atlanta and Columbus to what we saw in Chicago. And so that state level lift is holding nicely, obviously. That is a blunt force metric, right? We do a lot of detailed analysis underneath that to understand the lift, but we are, you know, we feel very good about the trajectory there. So that that's quite exciting. As New York mentioned, certainly having some stores in the ground.

You know, does help us in ongoing landlord discussions. We've already announced additional leases. And as you can tell, if you go back and look through the leases, we have 5 stores opening next year and we're quite excited about those.

Very. Your next question comes from the line of Chuck Grom with Gordon Haskett. Your line is open. Please go ahead. Hey, thanks very much. Good quarter.

Increasingly exciting, you know, for years we drive people in by getting them to be on our email list or download the app. Now, you know, the text messaging list is now meaningful. We've added things into promotional events, things like flash. Other promotional type levers that suppliers can use that just make these events more exciting and also makes it that that if it's a three day event, not everything is the same each of the three days. There's reasons to come back maybe multiple times during that. So I think. Continue to learn how to shape it and then, you know, as you know, we're in a variety. We're only in home goods, but we're in quite a variety of subcategories of home. And so we're also finding different ways to kind of mix across those categories in a way that makes what we're doing more and more interesting. thing as a place for customers to come and check out. So I do think there's innovation in what we're doing in addition to the fact that just the core recipe price reflection speed availability is very strong.

Thank you very much appreciate your next question comes from the line of Jonathan Matuszewski with Jeffries your line is open please go ahead.

Great, thank you. We have reached the end of the Q&A session. I will now turn the call back to the Wayfair team for closing remarks.

Hi, everybody. We just want to thank you for your continued interest in Wayfair and for joining. We hope everyone has a great holiday season. And we just want to remind you, whether it's Paragold or Wayfair, make sure you shop with us. We also have a specialty retail brand, so thank you. Thank you for your interest. This concludes today's call. Thank you for attending. You may now disconnect.