Shoppers dished out for new sofas, beds and decor, remodeled their kitchens and backyards and invested in their remote work setup. Demand was so hot that it broke global supply chains and caused lengthy delays for goods.
Fast forward two years. The picture looks a lot different now.
Inflation has tapped out lower and middle-income shoppers, who have pulled back their discretionary purchases to focus on paying for necessities like groceries, gas and rent. Wealthier customers have shifted their spending from furniture and other goods to travel and services. Mortgage rates are up, cutting into demand for new homes.
That’s pressuring Wayfair and other chains that saw a sales spike earlier in the pandemic.
Wayfair said Thursday that its sales declined 15% during its latest quarter ending June 30 compared with the same period last year; it also lost 24% of its active customers — sign that the company is struggling to retain the shoppers it gained at the beginning of the pandemic. Wayfair posted a net loss of $378 million during the quarter.
“Customers are being more deliberate about where their discretionary dollars are going as prices at the gas station and grocery store eat up a greater share of [their] wallet,” Wayfair CEO Niraj Shah said on a call with analysts Thursday.
“We have also seen many of those discretionary dollars flow away from goods to services, especially travel,” he added.
Shah said customers have been trading down to cheaper options and Wayfair has been increasing promotions to spur demand.
Wayfair’s stock has plunged more than 60% this year, while RH shares have lost 45% and Bed Bath & Beyond is down 57%. Williams-Sonoma, which also includes West Elm and Pottery Barn, has dropped 13%.