E-commerce stocks plummet as consumers cut back on online spending

Etsy website

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Shoppers are looking to return to brick-and-mortar stores as inflation raises concerns that consumers are cutting back on spending on some items to still afford basic necessities.

The combination spells bad news for many e-commerce-focused retailers, and their shares fell amid a broader sell-off in the market on Thursday as investors feared their growth could stall sharply and profits could be harder to come by.

Wayfair’s shares fell more than 20% to hit a fresh 52-week low after the online furniture retailer posted a larger-than-expected loss in the first quarter and registered fewer active customers.

Wayfair Chief Executive Niraj Shah told analysts in a conference call Thursday morning that the “typical seasonal pattern of incremental demand growth” that businesses are accustomed to tracking is manifesting itself in a more “muted” manner.

He also said he’s noticed that more shoppers are spending more of their wallets on non-discretionary categories and are “re-prioritizing experiences like travel.”

Read more: Rising prices are making consumers wonder: Can I live without it?

Etsy shares fell 16% following the online market’s disappointing Q2 guidance. Shopify’s stock fell nearly 17% after the company forecast lower first-half revenue growth as the company makes tough comparisons during the pandemic era.

Shares of Poshmark, an online second-hand shopping site, fell about 15% around noon ET. Thursday. Shares in The RealReal and Farfetch fell about 12%, while shares in Warby Parker, ThredUp, Peloton and Revolve fell about 10%.

“Investor appetite for the fast growth, negative EBITDA (and free cash flow) of pandemic winners is very low,” Wells Fargo analyst Zachary Fadem said in a note to clients.

Mastercard’s SpendingPulse report, released Thursday morning, said total US retail sales, excluding auto sales, rose 7.2% year-over-year. At the same time, e-commerce transactions fell by 1.8%, while in-store sales increased by 10%.

Gordon Haskett analyst Chuck Thunder wrote in a note to clients that he continues to gather evidence that consumers are only beginning to resist rising prices, “soon to be a potential puzzle for retail space.”

This story is evolving. Please stay tuned for updates.

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