E-commerce crunch takes its toll on several big names, citing a shift in demand toward travel and experiences (benefitting booking services and hotel groups).
Wayfair (-10.75% Since Close) Active Customers Declining YoY: “Q1 KPIs broadly reflected the macro trends that Niraj outlined earlier. For the trailing 12 months, we had more than 25 million active customers, which was 23% lower year-over-year. Order frequency over the last 12 months was 1.87, a decline year-over-year but in line with levels we saw right before the onset of the pandemic.”
Etsy (-12.2% Since Close) Grapples with Higher Competition for Wallet Share: “It's been a bit of an unpredictable and volatile start to the year… which was marked by a rebound in global mobility and headwinds from the highest inflation the U.S. has seen in over 40 years. Further, geopolitical events appear to be causing additional headwinds, particularly in Europe. We estimate that the direct impact of the crisis in Ukraine, including lost GMS from both Russian and Ukrainian sellers, was about 40 basis points versus the forecast when we set guidance for the quarter. In short, disposable income is lower and competition for share of wallet is higher across our markets.”
Shopify (-17% Since Close) Sees Inflation Pushing Consumers to More Discount Retailers: “Another factor that impacted year-over-year GMV growth more than expected, although to a lesser extent than mobility, was inflation at a record level, pushing more consumer spend, both online and offline, toward discount retailers in Q1 of this year as consumers' wallets were stretched from higher prices, including a surge in gas prices due to the war in Ukraine.”
EBay (-5.9% Since Close) Softens Outlook Due to Omnidirectional Pressures on Consumer Spending: “Moving to our outlook. Russia and Ukraine have historically made up less than 1% of our global volume, but the war in Ukraine has measurably impacted economic growth and consumer confidence throughout Europe and other parts of the world. This conflict arose as global economies were already contending with inflationary pressures and supply chain challenges. On top of that, rising interest rates may further hinder near-term economic growth, while sanctions related to the war could raise already high fuel prices, additional pressure on consumer spending.”
Wayfair Notes Shift Away from E-Commerce Toward Travel & Experiences: “In February, I noted we were seeing early signs of normalization in consumer behavior as the pendulum that pulled heavily towards e-commerce in 2020 and swung back to physical retail in 2021 had begun to even out. This is still the case, but in just the 2 months since, a lot has transpired. With rising prices across the retail universe and amidst troubling geopolitical events, our mass customers in the U.S. and internationally appear understandably more focused on where they are spending their next dollar, pound or euro. Consumer spending is still climbing for retail overall. However, even with the relatively healthy individual balance sheet, shoppers are nonetheless diverting a larger share of their wallets to nondiscretionary categories and reprioritizing experiences like travel.”
Etsy says Mobility is Approaching Pre-Pandemic Levels: “Mobility indices are approaching 2019 levels and pent-up demand may drive this even higher, meaning the possibility of more movement and travel and less time for at-home shopping.”
Mobility Resuming with Vigor: “I want to first speak to what we're seeing on the macro front and how it relates to what we've seen over the past 2 years because that's impacted our results in Q1… The timing of Omicron easing was also a factor with mobility resuming with vigor earlier in Q1 of this year versus Q1 of last year, causing a shift in consumer spend to offline retail and travel starting in early February this year in strong contrast to a year ago, where that shift occurred in late March and into April.”
According to Shopify, Mobility is a Near-Term Headwind, but also an Indicator of Broader Strength in Commerce: “As we start to put the pandemic behind us, there is yet another shift happening in commerce… Beginning in February, many people, myself included, celebrated the easing of Omicron and rolling back of mandates with travel, dining out, entertainment and in-person shopping. While this new mobility moderated the explosive growth in online activity that we've seen over the last couple of years, it drove home the importance of commerce everywhere, online, in-app and in real life.”
Marriott International (+3.9% Since Close) Discusses Global Travel Demand: “Global demand rebounded strongly and swiftly during the first quarter after a brief Omicron-related slowdown early in the year… COVID-19 is still impacting our business to varying degrees around the world, but as global vaccination rates increase, case counts decline and new COVID variants are tending to be less severe. Many countries have started to cautiously adopt a live with COVID policy, leading to a rise in demand for all types of travel.”
Booking.com (+5.57% Since Close) Sees Widespread Appetite for Experiential Consumer Spending: “We are seeing the benefits of the global recovery from the pandemic with strong travel demand in the U.S. for Priceline, a rapid recent improvement in trends in Asia for Agoda, an uptick in international flight searches at KAYAK, and the return of diners to restaurants for OpenTable.”
BKNG Optimistic About Summer Travel: “In our accommodations business, we saw a meaningful improvement from last year with first quarter room nights declining only 9% versus Q1 2019, which was an improvement of 12 percentage points from our fourth quarter 2021 results. Our bookings continue to strengthen in April, with room nights increasing 10% and gross bookings up over 30% versus 2019, making April a record month for gross bookings and the first month that global room nights exceeded 2019 levels. At Booking.com, I'm encouraged by the strong gross bookings already recorded for the summer period, which are over 15% higher than at the same point in 2019. In Western Europe and North America, gross bookings for the summer period are now over 30% ahead of where we were at this point in 2019.”
Summer Travel Also Optimistic for Trivago: “As a business, we experienced a temporary drop in travel activity across many European countries at the end of February. But since then, we have seen a continuation of the strong improvement in travel sentiment and activity. We continue to expect a very strong summer and believe that autumn and winter will see significantly higher travel activity than the last 2 years.”
Macro Headwinds Give Trivago an Advantage via Price Comparison Tooling: “Two years of pandemic and lockdowns have led to significant staffing shortages in the industry, contributing to rising hotel prices. We believe that the effect of this increase, combined with inflation, more generally, will increase the value of price comparison that we can bring to our users in the months and potentially years to come. We are, therefore, continuing to focus both our messaging and product development on price comparison as we believe that our core value proposition is more relevant than ever.”
Expedia (+2.7% Since Close) Suggests This Summer’s Travel Demand is Basically Immune to Current Market Volatility: “So despite the usual caveats for COVID, now a rising inflation to worry about and of course, the geopolitical situation, the pent-up demand that's out there for travel seems to be outweighing anything the market can throw at it, and we continue to be feeling very good about a summer recovery that should be very robust.”
Airbnb: “Now despite the pandemic, the war in Ukraine and macroeconomic headwinds, Q1 was another incredible quarter… What these results show is that 2 years into the pandemic, Airbnb is stronger than ever before… Now why is this? Well, millions of people are now more flexible about where they live and they work. And as a result, they're spreading out to thousands of towns and cities, and they're staying for weeks, months or even entire seasons at a time. Now through our adaptability innovation, we've been able to quickly respond to this changing role to travel, and these incredible results were driven by a number of positive business trends.
Expedia (VRBO) Corroborates Airbnb’s Statement that City & International Travel Rebounds are Driving Strong Performance: “Vrbo performed well during the quarter and continued above 2019 levels, and our hotel businesses rebounding with city and international travel coming back.”
Yum! Brands (+1.7% Since Close) Posts Strong International Results, Excluding China: “Let me share a few global trends from the quarter. As Yum China shared on its first quarter earnings call last night, COVID-related lockdowns impacted restaurant operations and depressed sales in that market, temporarily delaying an eventual recovery. However, our results outside of China remains strong. In fact, excluding China, both our KFC Division and Pizza Hut International same-store sales were up 10%, which would result in consolidated Yum! same-store sales excluding China of 6% for the quarter. We're pleased with the continued momentum in our developed markets as they lap strong results from last year, and we're excited about the continued resurgence of emerging markets, with same-store sales excluding China of positive 18% for the quarter. We continue to be encouraged by the global consumer recovery underpinned by returning consumer mobility, creating a tailwind for our on-premise dining while we sustain our off-premise business.”
Yum! Expects Softness from Major Markets: “Additionally, we expect continued softness in China and a full quarter impact from the exclusion of Russia profits.”
SBUX (+5.2% Since Close) Suspends Q3 & Q4 Guidance, Citing Lockdowns in China: “The situation in China is unprecedented. Shanghai, a city 4x the size of New York City, is completely locked down. Other major cities, including Beijing, are experiencing new COVID outbreaks and implementing new mobility restrictions pursuant to China's strict zero-COVID policy. Conditions in China are such that we have virtually no ability to predict our performance in China in the back half of the year. Given the materiality and the high level of ongoing uncertainty around China, accelerating inflation and the significant investments we are planning, the only responsible course of action for us to take is to suspend guidance for Q3 and Q4.”
Despite China Headwinds, Starbucks Underscores Strong International Growth & Opportunities: “I'm very pleased with the growth we're seeing from our international business. Excluding China, our International segment grew comps in the double digits in the quarter, stronger than anticipated, demonstrating the strength of our diversified portfolio and the opportunity ahead. Even including the impact of China, our International segment still grew 4% in the quarter over last year to a record $1.7 billion. Our international store base grew 9% over last year to over 17,700 stores. [15%] of that growth was in licensed markets. We expect 75% of the net new stores we will open in fiscal '22 to be outside the U.S., further underscoring the enormous global and the opportunity ahead.”
Restaurant Brands International (-2.51% Since Close) Outline International Initiatives Despite China & Russia/Ukraine: “Our development results in the first quarter kicked off another exciting year, and we're still expecting to accelerate overall net restaurant growth despite our decision to cease restaurant development in Russia and a recent surge in COVID cases across China. In fact, we opened a record number of restaurants during the first quarter, led by all of our brands internationally and by Popeyes in the U.S. We also announced another exciting new development partnership with Tim Hortons in India, a priority market for us in our long-term international expansion plans.”
QUESTION: “Which regions fueled growth in the quarter? And generally, do you expect growth to accelerate except for, I would imagine, you're going to have more Russia negative impact. I think you're including Russia in the comp base there, and I would imagine China will be a bigger headwind into 2Q as well. But I'm wondering how we should be thinking about what markets are really fueling the growth and maybe some gives and takes in terms of markets going forward?”
ANSWER: “As I mentioned in my prepared remarks, we're excited by the work that's happening internationally and the progress we're making. It's really broad-based across regions, with the exception of Russia and China that I mentioned with some headwinds given the more recent restrictions there due to their Zero COVID policy. Across regions and some of the key markets that we have, larger markets, Spain, Korea and several others, we've seen a combination of good work on the menu side, continued growth on the digital front, off-premise continues to be a strong part of our growth with delivery as well as some curbside and digital rewards type of programs.”
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