W with a strong headline EPS number on a revenue miss. Revs were worse than we expected, though gross margins better given the continued opportunistic pricing environment. That put gross profit inline with our model, but SG&A line items came in below expectation. The revenue trend is ugly into 3Q, with management noting sales down high teens to date. That compares with +70% this time last year, so trending 2 year average in the mid 20s, as bad as we have seen for W in its history. That revenue trend is worse than what we are seeing from some other online competitors. OSTK noted down single digit trends so far in 3Q, that is probably at least 10-15pts ahead of Wayfair US revenue trends (we suspect intl is outperforming US). LTM Customer count fell for the first time ever Q/Q which management credited to a “math optical illusion”. The only illusion aspect is the fact that the company reports the metric on and LTM basis, so attrition actually start/inflected in mid 2020, but LTM nature made it look better then, so now we see that in the numbers. Attrition going against W, it won customers too easily in 2020 with competitors temporarily leaving the category, now it’s giving them back and it shows in the revenue/share trends. Earnings were not officially guided, but down high teens revenue so far vs the street at +5% for the Q. EBITDA margins implied around 1-2% with the street at 5%. Earnings estimates should head lower, the implied multiple is going up. This stock was perhaps overly shorted into the print with the market rapidly becoming aware of the revenue issues over the last month. We don’t think the market will buy a margin story given the opportunistic pricing environment in the context of crashing revenues. Our revenue numbers are going down, gross margin up given ceded share for GM%, and taking SG&A down after this Q results and management commentary. All in we’re coming in at $3.21 in EPS and $734 in EBITDA for 2021. In 2022 and 2023, we’re 40-50% below consensus. Best Idea Short.
