Amazon (AMZN) and Wayfair (W) Likely Experienced Strong Home E-commerce Growth in Q1, Expert Says

April 7, 2021 9:39 AM EDT
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Cowen analyst John Blackledge shares key takeaway messages from his conversation with one of the largest Home sellers on Amazon (NASDAQ: AMZN) and Wayfair (NYSE: W).

The business is largely comprised of Outdoor Home Goods Products sold across several online marketplaces, the analyst notes. His business company generates about 55% of revenues on Amazon and 15% on Wayfair.

The company witnessed huge demand in Q1 as sales soared 160% on a year-to-year basis, mainly driven by stronger-than-expected spending in March, mostly driven by warmer US weather, as well as stimulus payments.

“Our seller noted that AMZN has opened things up at FBA somewhat (improving in Jan.), and while there are still limitations, they aren't running out of stock every two weeks. His 1Q21 AMZN sales were helped relative to W (which was +100%, see below) partially due to certain categories that did not sell as well on W in 1Q. As a reminder, our seller noted back in 4Q that AMZN faced bottlenecks at FBA facilities as AMZN worked to keep up with elevated eCommerce demand even as they increased fulfillment capacity by ~50% in '20,” Blackledge writes in a note.

“For 2Q, our seller is expecting +20% y/y sales growth on AMZN and noted that he should have ordered more product, given the ongoing supply chain issues making it difficult to secure containers out of Asia. His company is currently out of stock on almost 30% of SKUs and has demand for 150 additional containers of goods, which totals about $15MM in revenue.”

Wayfair sales rose 100% year on year. One of the reasons why AMZN performed better is because of two categories on W that faced tougher competition in 1Q given a good supply of inventory, according to the interviewed expert. Lack of certain seasonal items can make winter sales on W to be weaker than elsewhere.

The expert also expects W to shift back “Way Day” to its typical 2Q timing after it was forced to reschedule last year due to the pandemic.

“Our expert still forecasts +50% y/y sales on W in '21, with 2Q expected to be "very telling" given that he faced a bad out of stock situation in 2Q20. Our expert's W sales were impacted in 2Q last year given it took W a couple weeks to get a product live; by contrast, he was able to launch new SKU's more quickly on AMZN. This year, he expects a faster launch time on W for new products,” the analyst adds.

On the supply side, shipping constraints in Asia remain a key challenge. Businesses are experiencing long lead times, higher costs to reserve container space, and factories pausing production due to a backlog of finished goods.

“Highlighting the impact, our seller stated that one of his factories in China had 50 containers of product sitting in a warehouse, leading to a temporary facility shutdown as they waited to reserve a container. Our seller notes that in many cases he could have reserved additional containers, but would have paid up to 5x the normal price, a cost which he ultimately passes on to the consumer,” Blackledge stresses.

Cowen rates both AMZN and W with “Outperform” ratings.

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