Niraj Shah: Thanks, Jonathan. Let me add a couple of comments and then let me turn it over to Kate, to give some of the specific kind of financial outlook information you asked for. So, what I would say is that in the international segment, we’ve got Canada, we have the U.K., we have Germany and we have with small business in Ireland. And, what you see is that actually each one of those is performing quite well. We’re actually now at a point where we’re taking market share in each of them. And, the unit economics in each of them has improved significantly as headed the right way. And so, a lot of what we’ve done in cost over the 18 months that started in the summer of 2022 got us to a great place across the board. And so, we’re very excited with how that’s playing out.
I would say that there’s some fixed costs. So, for prop for the inherent segment to be profitable, there’s an element of the growth needs to get to a certain level to overwhelm a certain degree of fixed costs. And, I would also say there’s some accounting things about how our corporate overhead gets spread that is in there. And, both of those will just play out over time. So, we feel good about the trajectory, but maybe Kate can provide some more details.
Kate Gulliver: Yes. Jonathan, just as a reminder, when you look at the segment breakout on international and the U.S., obviously, the corporate costs are allocated based on the revenue. And so, as that mix shift changes, the amount of corporate costs that gets allocated can shift around a little bit. I think as we look at international, as Niraj said, we’re encouraged by the signs that we’re seeing there. We’re seeing things go according to the plan. And in particular, if you look at that EBITDA loss, in the trailing 12-month period, the loss is roughly half of what it was prior. And, I think that shows really the nice improvement that we’re making there and the steady gains.
Jonathan Matuszewski: That’s helpful. Thanks for the color. And then, just a follow-up on AOV. I know usually this is an output, the consumer ultimately decides this versus an input in your models. But, it was down very slightly this quarter, less than 1%. So, how are you thinking internally about the trajectory for that? Is there anything you saw this quarter in units per transaction or trade down activity that would lead you to believe flattish trends in AOV for the second half could be potentially conservative? Thanks.
Niraj Shah: Yes. [Tim] (ph), so what I would say is like the big thing that drove AOV over the last few years was all the inflation that came in during the because of product scarcity during COVID followed by supply chain congestion during COVID. And, then subsequently as the particularly the ocean freight cost that came back down all the deflation that then ensued. Given that, that is largely behind us, what you’re back to is the dominant thing that will drive AOV over time. Broadly is more the seasonal cadence, where you have different category mix throughout the year. And so, AOV goes up and down based on that. And then, inside our business, if Paragould grows faster than the rest of the business that would raise AOV because our luxury platform has higher AOV for example.
So, you could have some mix shift. But I think you’re back to seeing a more normal pacing of AOV like you would have seen pre-COVID than those wild swings you saw during COVID. So, I think you can think of it as kind of normalized now.
Jonathan Matuszewski: Great. Thanks so much.
Operator: Your next question comes from Simeon Gutman with Morgan Stanley. Please go ahead.
Simeon Gutman: Thanks. Good morning. Thanks for the question. My first question, if we take the seasonality in orders from the first quarter and you take the seasonality in the AOV, it would have suggested that by the second quarter, we should be maybe flat to slightly positive and then solidly positive in sales by the back-half. I’m not asking about how conservative the guidance or I don’t know if there’s a guidance range, but is there any reason the seasonality process should doesn’t work for whatever reason? It sounds like you have advertising campaign, you have a new store coming. So, there should be maybe good guys to thinking about seasonality not bad, but making sure that that logic is right?
Niraj Shah: Yes. So, what I would say is so what I agree with is last year the category had significant deceleration. And, there was deceleration that happened in the back half of last year as well as earlier in the year. And so, the slope of last year is this negative slope. So this year, if you do not see significant macro deceleration on a sequential basis, the category compares, our compares, everyone’s compares should get much easier in the back half than they are now. And so, I think that’s what you’re pointing out mathematically to be true. And, we would totally agree with that. I think the question is maybe you don’t see as much macro deceleration this year as last year, but maybe you see some. So, maybe just rolling forward 100%, maybe that may or may not happen.
But as we said, like we’re flat year-over-year right now, and we were negative 2% in the first quarter. So, to your point, the numbers you were talking about, that’s kind of what you said as well. So, we’re pretty optimistic about how this plays out, because you have the math of the category and how that should make compares easy. And then frankly, we’re continuing to take market share and we feel very good about the position we have. And so, there’s obviously a lot of other variables that are out there. Obviously, the Fed did their latest update yesterday, and what they choose to do affects the overall macro economy, it would affect us. So, those things are hard to guess, but that’s kind of my answer. But, maybe Kate will give you some more detail by quarter or something.
Kate Gulliver: We’re not going to give detail by quarter, as you and Simeon both no. But Simeon, I think what I would say is that we are very focused on what we can control, which is that ongoing share gain fees. And so, thinking about our own seasonality is a helpful way to look at it. Thinking about how we continue to gain share, I think, is a helpful way to look at it. Predicting what the category does in the back half, obviously, Niraj provided the context from last year and predicting what that does in the back half. I’m sure there’s a range of opinions on that. And so, our focus is really keep delivering on an excellent offering for the customer. You’re seeing that show up in our active customer growth continuing to improve in our flattish position right now and over time that will return us to the strong growth that we’ve had previously.
Simeon Gutman: That’s helpful. And then, the follow-up, maybe taking that one step further. The relationship that was provided last year, $600 million of EBITDA on a flat revenue scenario, there was some inherent if we get upside to flat revenue, whatever your prevailing assumption was on incremental margin, has that changed in any way? Are you thinking of spending in any different way on that upside or does those incremental margins should apply in the same way that it did when you gave us that framework?
Kate Gulliver: Yes. So, as I said on the call, that framework of flat and $600 million hold. And again, that was not intended to be guidance. That’s really a construct for how to think about the sum total of the cost savings over the last 18 months, and how that would flow through the P&L in that hypothetical flat scenario. And then, to your point on incremental margins, yes, we’ve spoken to that coming in, in that mid-to-high teens range.
Simeon Gutman: Perfect. Thank you.
Operator: Your next question comes from the line of Anna Andreeva with Needham. Please go ahead.
Anna Andreeva: Great. Thanks so much. Good morning, and congrats. Nice results. We had a question on promotions. Niraj, you had previously talked about only one-third of sales, during these promotional events, coming from items that are featured in the promo discount. So, basically, once the consumer is engaged, they do convert at full price. So, just wanted to follow-up if that’s still the case. Just any color on that would be, super helpful. And, then as a follow-up, so the brand campaign, sounds like is off to a strong start. Just curious, how are you incorporating the learnings from that into the loyalty launch, that I think is scheduled for this fall? Thanks so much.
Niraj Shah: Yes. Sure, Anna. So, I think the way to think about promotions is that promotions drive a lot of traffic to the site. And, what the customers they absolutely look at the items on promotion, but they also tend to then explore the aisle. And, they tend to buy the item that they like the most and that’s kind of what we’re referencing, is that only a portion of those sales are the items that are featured in the promotion, of the majority are the items that are actually in the aisle, not necessarily the featured items in the promotion. So, that dynamic remains true and that’s sort of been the case for kind of the entire time. That’s always been true. The brand campaign, so we didn’t about how the brand campaign can really help us deepen preference for Wayfair with customers.
Obviously, the loyalty program is also something that can deepen preference in the sense that if you join a program and it has benefits and those benefits entice you to come back, right, then that would build to you becoming more habitual. So, these are both two of the things we’re doing that. I think certainly help each other and would help a series of other things we’re doing, all in the effort of being your go-to-place for all things. So, and that’s absolutely our goal.
Anna Andreeva: All right. Helpful. Thanks so much.
Operator: Your next question comes from the line of John Blackledge with TD Cowen. Please go ahead.
John Blackledge: Great. Thank you. Two questions. First, kind of on the macro, is there a potential replenishment cycle for pandemic purchases ahead for the industry, kind of as we move further away from it? And, then second on Gen-AI, could you discuss Wayfair’s use of internally of Gen-AI across various departments? Any color on productivity gains? Thank you.
Niraj Shah: Thanks, John. On the macro replenishment cycle concept, there is a replacement cycle on the various goods we sell absolutely. It varies by type of goods. I do think the easiest way to look at it is no matter what way you look at it, the level we’re at relative to 2019 where we’re below 2019 in nominal terms way below in real or whether you do area under the curve and you take the pull forward, but then you see we’ve ripped way past that and we’re still off trend. No matter the way you look at it, you see that the category, which has kind of been a cyclical category forever, is in a cycle that’s down, which is always followed by a cycle that’s up. And, so I think that’s there’s no question about that.
I think the trick comes in when you want to time it precisely, right, which is I think gets to your question, because I do think things like interest rates and home sales and consumer sentiment all play roles in that. The way we look at it is there’s two ways to grow, and one way to grow is the market’s growing and how you take your excess share. But the second way is, regardless of if the market’s growing, how do you take your excess share, right? And so, go back to the concept of share taking how do we take share by being the easier place to shop, the better place to shop, better offerings, better value, faster delivery, more customized delivery, better merchandising, exclusive products, on and on and on and on. And so, that’s kind of what we’re focused on now.
And obviously, as the macro moves from negative to neutral and then neutral to positive, you’re going to see that buoy our sales dramatically. Steve, do you want to.
Steve Conine: Yes, yes. I can talk to the Gen-AI, I think it’s a topic area that I get focused on a lot inside the business. I think there’s areas like technology developed productivity or sales tools, sales and service team uses that we’re integrating with the business as you would expect. Now, I would say broadly if you look at us as our history in technology, I mean the business has done well by us staying kind of the forefront of tech innovation. And so, Gen-AI and using the other areas of the business is something that we’ve got all the different business leaders in the company sort of focused on, thinking about what’s most applicable and we’re seeing where there are wins and obviously staying efficient and staying current with cutting edge technology is something that, is going to continue to help us grow and do well going forward.
John Blackledge: Could I just ask one follow-up there? Could it be a tailwind to margins over the long-term with potential productivity gains?
Steve Conine: There’s definitely a lot of benefits to it. And, I think yes, between running the shop more efficiently, obviously, in retail, it’s a business of being efficient and certainly that’s going to help us over time. It’s also I think there’s really interesting things on the visual side. So, I think on the merchandising side, there’s some really exciting tools we’ve actually launched publicly. We’re just starting to get into better that I think could be meaningful for the consumer experience.
Niraj Shah: Yes. John, I think the way to think about it is like, over a very long period of time, the way I think to think about it is, I think a lot of these categories that have been much more fragmented are going to be much less fragmented. And, the scale players are going to be able to do many more things for customers, than non-scale players will be able to do and that’s going to cause concentration. Historically, to access selection, you had to visit many folks and it had to be fragmented. The idea that you could access selection from one retailer is only become possible with the advent of the Internet. So, then when you think about a scale player, what can you do with logistics? We talked a lot about that, right. What can you do with technology, we talked about that, but now you’re talking about different type of technology and you start thinking about we can do with Gen-AI.
Well, a lot of that requires scale in two ways. One, the R&D, you need to be willing to invest early. And, if you have scale, you can do that. It’s a very small amount of money in the scheme of things for you. The second is the, first-party proprietary data you have is the key to the whole thing. And, if you don’t have a fairly dense amount of that data, you’re not in a position to really do the things that are most interesting and novel. And, then those things will be you getting more scale. And, so I do think there’s a whole economic argument too on how that can grow margins. But, I think the bigger economic outcome comes into how demand moves to a smaller number of folks who can do things dramatically better for customers.
