Shares of Wayfair (W -3.74%), the online home furnishings retailer, were among the losers on the stock market this week. News on the company itself was minimal, but the Fed’s decision to trim its rate-cut forecast for next year — from four cuts to two — hit interest-rate-sensitive stocks like Wayfair hard.
As of 11:59 a.m. ET, the stock was down 15.5% for the week, according to data from S&P Global Market Intelligence.
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What’s happening with Wayfair
Wayfair has struggled since the end of the pandemic, as the housing market has been weak and its pandemic-driven surge is over.
Investors have looked forward to a recovery in the housing market to recharge the stock, but it now seems like that’s going to take longer than hoped.
In a broad sell-off yesterday, driven by the Fed’s change in its rate-cut forecast, Wayfair stock fell 9.9%, and it’s not hard to see why. High mortgage rates have cooled off the housing market, which has weighed on home furnishings companies like Wayfair, as home purchases tend to lead to furniture purchases.
Wayfair is also in a weaker position than many of its peers, as it’s not profitable on the basis of generally accepted accounting principles (GAAP). It had a net loss of $74 million in the third quarter, and its revenue fell 2% to $2.9 billion.
With results like that, something in the business needs to change.
Can Wayfair recover?
Wayfair is profitable on the basis of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), and the company is focused on driving that figure higher.
The company has cut costs through layoffs and other initiatives in recent years, but it seems unlikely to return to significant revenue growth without help from the macro environment.
While the Fed’s forecast is just a forecast, investors hopeful for a housing recovery may have to be patient.