Wayfair Has Burned Through $1 Billion This Year
Online furniture retailer Wayfair (NYSE: W) has one big advantage over many other retailers: It doesn't hold much inventory because its third-party sellers ship directly to buyers. Inventory doesn't eat up capital at Wayfair, which in theory should be a good thing in this economic environment. Other retailers have been stung by shifting consumer behaviors this year, and have been forced to clear out their bloated inventories by marking down prices.
Unfortunately, Wayfair's inventory-light business model has not saved the company from burning through a good chunk of its cash this year. Demand for its offerings has tumbled as inflation and economic uncertainties have made consumers cautious about spending. Wayfair's revenue plunged nearly 13% year over year through the first nine months of 2022. Meanwhile, its operating costs rose 13%.
This mismatch has swung Wayfair's free cash flow from a small profit last year to a gigantic loss thus far this year. Wayfair recorded a free cash flow loss of $1.1 billion through the first nine months of 2022. Based on its balance sheet, it won't be able to sustain those kinds of losses for long.
Source Fool.com
