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Wayfair Shares Drop 20% on Steeper-Than-Expected Loss

Furniture props sit in a storage area at the Wayfair photo studio in Westborough, Mass.

Wayfair has reported a streak of losses since its trading debut in October 2014 as it works to attract customers to its platform and brands including Joss & Main, DwellStudio and Birch Lane.

Spending for items such as advertising, merchandising and technology pushed total third-quarter operating expenses up 35% from the prior-year period amid the company’s push toward international markets. Revenue from its international segment—which includes sales in Canada, the U.K. and Germany—accounted for 12% of the company’s total in the third quarter, up from 8.6% the year before.

On an investor call, Wayfair said margins were also hurt by an increase in hiring to improve its customer-service operations. Head count increased by about 550 in the third quarter, said finance chief Michael Fleisher, and will continue to increase for the rest of the year as the company tries to bulk up its logistics network that handles deliveries of everything from bulky sectionals to fingertip towels. The company employs roughly 7,000 workers.

The Boston-based company undercuts traditional retailers by providing faster and cheaper shipping options and has grown to become the largest online seller of furniture. But the 15-year-old company, which has no physical stores and minimal inventory, has struggled to convince investors that it has staying power when e-commerce giant Amazon.com Inc. has signaled interest in making a deeper push into the furniture business.

About 15% of the $70 billion U.S. furniture market has moved online, researcher IBISWorld says.

Chief Executive Niraj Shah said he isn’t yet concerned with Amazon’s standing in the space.

“I don’t expect them to go away, but if you look through the pages on their site of where their volume is, it’s all a commodity opening price point items, same place where Wal-Mart and Target play,” he said. “As you move off that very bottom into the mid, I think that’s where you’re seeing us continue to gain huge share and traction.”

In all for the quarter, Wayfair reported a loss of $76.4 million, or 88 cents a share, compared with a loss of $60.9 million, or 72 cents a share, a year earlier. On an adjusted basis the company reported a loss of 66 a share compared with a 54-cent loss in the comparable quarter.

Revenue jumped 39% to $1.2 billion.

Analysts polled by Thomson Reuters had expected Wayfair to report a loss of 45 cents on $1.21 billion in sales.


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