E-Commerce Home Goods Store Wayfair Files For IPO

| About: Wayfair (W)

According to Euromonitor International, the US home goods market is expected to grow 2.5% annually over the period 2013 to 2023, expected to be worth $297 billion in 2023. Researchers also estimate that the current US home market has very limited online penetration with a mere 7% of the sales being made through this channel. Boston-based Wayfair (NYSE:W) is trying to make a difference in this online market.

Wayfair's Financials

Founded in 2002 by Niraj Shah and Steve Conine as CSN, Wayfair was launched with the site racksandstands.com to sell home storage furniture online. Wayfair now claims to be the largest pure-play online retailer of home goods in the US. Wayfair's success lies in its ability to offer to customers a large selection of products while holding minimal inventory. The company is able to do that through a custom-built, seamlessly integrated technology and operational platform that helps ship products directly from suppliers to customers. The platform also boasts of strong supplier integrations and a proprietary transportation delivery network to help build these capabilities.

Wayfair has seen rapid adoption since inception. So far, it has delivered more than 11.8 million orders with 3.3 million of them being fulfilled last year. As of 2013, they had over 2.1 million active customers. The inventory includes more than 7 million products from 7,000 suppliers across five distinct brands - Joss & Main, All+ Modern, Dwell Studio, Birch Lane and wayfair.com.

Wayfair's Financials

Wayfair has seen strong revenue growth over the past few years. Net revenues for 2013 grew 52% over the year to $915.8 million. For the six months ended June 2014, revenues improved 50% to $574.1 million. The company is operating at more than a $1 billion in revenue run rate for the year. Sales from Direct Retail, which includes revenues from the sites of its five brands, accounted for $673.4 million in 2013 and $469.5 million for the six-month period ending June 2014. The remaining revenue was contributed from third-party sales through its websites.

Continuing investments in advertising and marketing efforts have resulted in increasing losses during the years. In 2013, the company suffered a net loss of $15.5 million with an adjusted EBITDA loss of $2.9 million. For the six months ended June 2014, net loss increased significantly to $51.4 million and adjusted EBITDA loss of $37.0 million.

Among other metrics, the last 12-month net revenue per active customer has increased 7.3% over the year in 2013 to $322. For the six-month period ending June this year, that metric improved to $332. Mobile also is improving and for the first six months this year, Wayfair saw 28% of all Direct Retail orders delivered as placed from a mobile device compared with 21% a year ago.

Wayfair has been largely venture funded with funding of $358 million raised so far from investors including T. Rowe Price, Battery Ventures, Spark Capital, HarbourVest Partners and Great Hill Partners. The latest round of funding of $157 million was held in March this year when it added T. Rowe Price to its investor listing. The funding valued the company at more than $2 billion. Last month, Wayfair filed its S-1 confirming plans to raise $350 million through the IPO.