Want CEO Peter Szulczewski opened his shareholder letter final week in a approach that was sure to scare off buyers, who had been already involved about an organization that had struggled since going public simply eight months earlier.
“After a robust begin to the second quarter of 2021, demand slowed as a result of a lot of headwinds,” Szulczewski wrote within the first sentence of the letter revealed late Thursday, alongside Want’s earnings report.
Want shares plunged 20% on Friday and continued sliding on Monday, dropping one other 9% to shut at $6.87. The corporate, which operates a reduction e-commerce app, debuted at $24 a share in December and traded as excessive on $31.19 on Feb. 1. The inventory has since misplaced greater than three-quarters of its worth.
Want reported a 6.4% drop in quarterly income from a yr earlier to $656 million, whereas analysts anticipated a slight improve. Its web loss swelled by tenfold to $111 million, and month-to-month energetic customers (MAUs) dropped 22% to 90 million.
The corporate attributed the disappointing gross sales figures to the reopening of the financial system and a return to bodily purchasing. Comparable bulletins have come from e-commerce corporations Amazon and Wayfair, which reported weaker-than-expected income, and Etsy, which missed estimates with its forecast.
Nonetheless, Want’s enterprise has deteriorated way more dramatically. Within the third paragraph of his letter, Szulczewski admitted that extra customers deserted the app than anticipated.
“From a macro perspective, as vaccine charges elevated, stay-at-home orders started to ease, and economies began to extra broadly reopen around the globe, each day consumer exercise and energetic patrons on our platform declined greater than we had anticipated, significantly within the U.S., France and Italy — three of our largest markets,” he wrote.
App installs dropped 13% from the prior quarter and common time spent on the app plummeted 15%, Want mentioned. That each one led to a 29% drop in market income from a yr earlier. A few of these losses had been offset by its logistics enterprise, which grew 126%.
In the meantime, advert prices elevated at a sooner tempo than anticipated, chopping into Want’s advertising effectivity.
The issues started in March, when Want disclosed in its fourth-quarter earnings report that MAUs had dropped 10% globally from the prior yr. In its subsequent monetary report in Might, Want mentioned first-quarter MAUs fell by greater than 7%. The next month, CFO Rajat Bahri mentioned he was leaving the corporate.
Analysts at William Blair downgraded the inventory to the equal of a maintain on Friday, noting a constant sample of underperforming Wall Road estimates.
“Since its IPO, reported outcomes have missed Road expectations (and our mannequin) throughout key engagement metrics (i.e., MAUs) for 3 consecutive quarters,” the analysts wrote. “Given each macroeconomic headwinds and company-specific headwinds particular to consumer engagement and retention, we wouldn’t have good visibility into our forecast.”
Want mentioned it is making some “main adjustments” in the way in which it operates. The corporate plans to reinforce product high quality, make the purchasing expertise extra enjoyable and enhance app efficiency. It additionally famous two current hires from Google: Farhang Kassaei as chief expertise officer and Tarun Jain as product chief.
Buyers searching for the enterprise to show round are going to need to be affected person, as tangible enhancements aren’t prone to present up within the financials for a yr, the corporate mentioned.
“We don’t count on these new initiatives to contribute meaningfully to constructive year-over-year outcomes earlier than the second half of 2022,” Szulczewski wrote.
WATCH: Watch CNBC’s full interview with Want CEO Peter Szulczewski