Wayfair: Another Restructuring Announced to Further Reduce Expenses, Shares Remain Undervalued

No-moat Wayfair announced a 13% reduction in its workforce on Jan. 19, which is expected to deliver annualized savings of $280 million (at the expense of $70 million-$80 million in costs), with roughly 45% coming from cash compensation, a move we commend to ensure a path to consistent profitability. Shares jumped around 10% on the news, given that the firm now expects to print 2024 adjusted EBITDA of more than $600 million, ahead of our roughly $400 million estimate and consensus’ $470 million projection (FactSet). However, this is based on a flat revenue environment in 2024, which may or may not come to fruition depending on consumer strength. In fact, adjusted furniture and home furnishing sales (U.S. Census) have averaged a 9% decline over the last six months, implying that Wayfair would have to take massive share if this trajectory continued. Between 2019 and 2022 industry sales grew by 23% (a roughly 7% CAGR), while spending on goods outpaced services for a stretch.