Wayfair Inc. 2026 Q2 Earnings Call

Ryan, please go ahead. Good morning, and thank you for joining us.

Today, we will review our second quarter 2026 results. With me are Niraj Shah, Co-Founder, Chief Executive Officer, and Co-Chairman, Steve Conine, Co-Founder and Co-Chairman, and Kate Gulliver, Chief Financial Officer and Chief Administrative Officer. We will all be available for Q&A following today's prepared remarks. I would like to remind you that our call today will consist of forward-looking statements, including, but not limited to, those regarding our future prospects, business strategies, industry trends, and our financial performance, including guidance for the third quarter of 2026. All forward-looking statements made on today's call are based on information available to us as of today's date. We cannot guarantee that any forward-looking statements will be accurate, although we believe we have been reasonable in our expectations and assumptions.

Our 10K for 2025, our 10Q for this quarter, and our subsequent SEC filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made today. Except as required by law, we undertake no obligation to publicly update or revise any of these statements, whether as a result of any new information, future events, or otherwise. Please note that during this call, we will discuss certain non-GAAP financial measures as we review the company's performance, including contribution profit, contribution margin, adjusted EBITDA, adjusted EBITDA margin, and free cash flow. These non-GAAP financial measures should not be considered replacements for, and should be read together with, GAAP results.

Please refer to the investor relations section of our website to obtain a copy of our earnings release and investor presentation, which contain descriptions of our non-GAAP financial measures and reconciliations of non-GAAP measures to the nearest comparable GAAP measures. This call is being recorded, and a webcast will be available for replay on our IR website. I would now like to turn the call over to Niraj.

Thanks, Ryan, and good morning, everyone. We're pleased to be with you today to discuss our second quarter results. Q2 marked another strong quarter of share capture and top-line momentum with 7.5% net revenue growth. Our growth this quarter was fueled by momentum in orders, which were up by 6% for the period. Compared to Q1, orders were up over 12%, the best sequential growth we've seen in a Q2 since the second quarter of 2020. AOV grew by 1.2% year-over-year, continuing a very consistent trend of low- to mid-single digits growth that we've been seeing for years now. Active customers also continued its upward trend, growing by more than 3% year-over-year in Q2.

While there's still some broader macro uncertainty and depressed housing turnover, by our measure, this marked the first quarter of flat to slightly positive year-over-year category growth that we've seen in the U.S. since 2021. Those skewed towards higher growth in the higher income segments. Our U.S. segment accelerated to nearly 9% year-over-year revenue growth, continuing the high single-digit share spread we've held since last fall. In fact, revenue growth in the U.S. was the best we've seen in the entire post-COVID period. In keeping with the often discussed K-shaped recovery, we saw noteworthy outperformance from both our specialty retail brands, which grew by nearly 20% in the second quarter, and Perigold, which grew by more than 35% in the luxury segment.

What is exciting for us is that we are seeing accelerating growth in the Wayfair business and complementing that with outsized growth in the specialty and luxury segments, all building to why we expect to see even further growth acceleration as our numerous initiatives further play out. Today, I'd like to spend a bit more time digging into Perigold, because it's a good example of one of our numerous initiatives, and the momentum we've seen there over the past few years has been tremendous. I'll start with a bit of history for those less familiar. We launched Perigold in 2017 with a simple thesis. The U.S. has roughly 15 million high income households that together spend more than $100 billion a year on their homes. Prior to our entry, this customer had no real digital destination that matched the way she actually wants to shop.

The best design brands in the world, names like Century Furniture or Vanguard, were locked behind exclusive showrooms available to the trade only, or scattered across single style, single category competitors. Nobody had built the whole of luxury home into one platform that was simple to access. That gap was the opportunity, and it's exactly what we set out to close. Today, Perigold offers close to three and a half million products from 1,500 brands, spanning every style and category of the home. We see a long runway simply in continuing to expand the breadth of what we already do well. You'll see us build the catalog over time, expanding our selection across classes like large appliances and kitchen cabinetry that historically were not offered on a luxury digital platform.

On the financial side, Perigold has grown at a double-digit rate every single year since launch, including 20-plus percent growth in both 2024 and 2025, that growth has recently accelerated further. We posted robust double-digit year-over-year growth in both the first and second quarters of this year, meaningfully outpacing the broader luxury home market, which by our estimates and competitor reporting, is growing in the low single digits. In round terms, Perigold is now a business doing a bit over $400 million a year in sales. Still modest next to wayfair.com's overall scale, but growing quickly and doing so profitably. Margins have also expanded even as we funded two store openings and stepped up our brand investment in Perigold. We have a clear line of sight to grow Perigold into a multibillion-dollar business in the years ahead.

Importantly, we intend to get there while expanding profitability, consistent with how we run every part of Wayfair. Driving the ongoing strength in Perigold is a substantial and growing customer file. We have an active customer base approaching 400,000, up nearly 20% year over year. That customer base spends almost three times what we see from a typical wayfair.com shopper in a single year. Roughly 40% of Perigold customers each year are entirely new to the Wayfair family of brands, which tells you this isn't just a repackaging of existing demand. We're pulling in a customer we would not otherwise reach. One who is more affluent and more resilient across economic cycles. While a novel aspect of Perigold is its B2C access and offering, our trade and business customer is a real and growing part of the story, too.

Following the relaunch of our trade program earlier this year, which introduced a simplified, more competitive discount structure for designers, architects, and other professionals, B2B has grown to an all-time high share of Perigold's volume. How do we differentiate against a highly fragmented competitive set? Our competitors range from a few national chains who have a specific design point of view to thousands of small independent shops, each with a limited selection. Perigold's advantage is breadth without compromising quality. We built curation standards around materials and construction so that everything from our opening price point up through the most exclusive design trade brands all meet a consistent bar. The selection overlap between Perigold and Wayfair is very narrow. By having both platforms, we offer customers the ability to shop the wide expanse of home under one umbrella and benefit from our loyalty programs, delivery capabilities, and technology features.

We are, for the large majority of our supplier base, the primary online partner, which means when a customer comes to Perigold, she's getting the deepest version of that brand's assortment anywhere online, not a curated subset. Just as important, Perigold isn't building all of this on its own. It draws directly on the infrastructure we spent nearly two decades building for Wayfair. Our logistics network, including CastleGate and our broader delivery network, gives Perigold a level of shipping speed and reliability that a business of its scale would be challenged to build independently. The same is true of our technology platform. Search, personalization, checkout, and all the engineering investment that goes into it. Our marketing engine, from our paid media scale to our supplier advertising programs.

Because Perigold can lean on that shared investment rather than duplicating it, its own team and dollars go almost entirely towards the things that make it distinctly luxury. Curation, brand, and service. That's a structural advantage a standalone luxury competitor simply doesn't have. It's a big part of why Perigold can punch so far above its weight. Because the luxury customer's bar for service is even higher than it is for the rest of our business, we built free white glove delivery into the model, along with proactive high-touch order monitoring on larger purchases, which has driven meaningfully higher repeat rates and post-delivery satisfaction scores. This past year, we extended that differentiation by pushing into stores, opening our first two stores for Perigold in Houston and West Palm Beach. About 20% of our store staff are trained designers, offering complimentary design services both in store and virtually.