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21:23Carol Massar:We feel really good about the guide, the mid-single digits revenue growth and improved adjusted EBITDA throughout the quarter. So when we look at it, we feel that we've produced pretty strong results. Yeah, I mean, you look at the quarter, I mean, adjusted EPS better than what the street was expecting. just at EBITDA, as you said, coming in stronger. Net revenue up about 7 % year over year. Gross margin coming in better than the street estimate. There were a lot to do. So maybe we talk a little bit about, you know, I am curious. You know, you guys have dealt with the call and so on and so forth.

21:58Carol Massar:What are you hearing from the investment community that they're not just so comfortable with, Kate? Yeah, you know, actually, you know, as we talk to investors, I think, again, they're pleased with the momentum that we see here. You know, obviously, we're in a category that has been under pressure, right? So the category itself, we think, was down low single digits in the fourth quarter. You know, to your earlier question sort of around weather in the first quarter, we do think the category has been impacted in the first quarter of this year, you know, likely, you know, down low single digits again, maybe slightly worse even than Q4.

22:29Carol Massar:So there's certainly some complexity in the overall category here. You know, what can we focus on? we can focus on what we can control. And our share gain continues to be a real source of strength. You see us outstripping the category by several points, right? And that's continued, you know, Q3, Q4, and then again into the guide in Q1. And we should point out that investors have been really keen on your stock. I mean, nearly doubling over the past year. Kate, let me just go to what you said. I mean, maybe it is those concerns about some softer active customer trends kind of early on in the first quarter.

23:01Carol Massar:Give us an idea of what you're seeing and any idea, or can you tell if that continues? It's a great question. Active customers is one of our reported KPIs. It's actually a lagging indicator. That metric is LTM active customers, so anyone who's placed an order within the last 12 months. As orders grow, and you do see that order volume grew in Q3 and in the quarter we just reported Q4, that sort of precedes active customer growth. The other thing I do just want to point out there is we did exit in January of last year, German business. So that took a large chunk of customers or not a large chunk, but a chunk of customers out of that number.

23:40Carol Massar:And so as you're looking at that active customer number, you know, obviously that came out. So we'll clear that comp. You know, we exited that in January of this past year.

23:48Tim Stenovec:You did say the sector has been under pressure and Carol mentioned some of the peers, but what about the Wayfair consumer when they're buying something on the platform right now? Are they buying it because they need to replace something in their home? Are they buying it because they have extra money to upgrade something? What's the profile of the consumer? And in other words, how is the consumer doing?

24:09Carol Massar:It's a great question. We're seeing a few trends. So you mentioned some of the sort of luxury peers. Obviously, we have high-end brands that do compete with those players, like a Paragold or specialty retail brand. The Wayfair brand itself, you know, plays all the way from opening price point to, you know, upper end mass. So really spans the full range. And we have seen, you know, a divergence, some of that K-shaped economy. I'm sure we've all been talking about now for a bit. Certainly our Paragold brand or specialty retail brands are growing, you know, really north of 20 percent, we said in 2025.

24:42Carol Massar:So you can see that accelerating beyond, you know, the overall core business. And I think that speaks to the strength in that higher net worth consumer. We also do see a bit of a divergence in the types of things that people are buying. When I talk about the category being down low single digits, that's a category overall. We actually think furniture or bigger ticket items are down more. That tends to actually be where we are more focused and have a bigger part of the business. But we also, of course, sell decorative accents, seasonal decor. That part of the business seems to have done a bit better from a category perspective overall.

25:19Carol Massar:So those would be lower ticket items, you know, that may feel more comfortable for folks to purchase right now. Well, and the other thing I want to ask you, and listen, Kate, we're obsessed with this, the buy now, pay later, and you can do that on Wayfair too. Are you seeing an uptick in that? Yeah, we have a number of options, you know, for various financings and buy now, pay laters. We work with a wide range of partners. I do think it's an important offering for the consumer. So to sort of ensure good underwriting for folks and provide them with a lot of optionality. I would say our penetration there has been lower than other more traditional brick and mortar furniture retailers.

25:58Carol Massar:So as we grow, we're really trying to get to sort of a more natural place there for the furniture industry overall.

26:04Tim Stenovec:We're speaking with Kate Gulliver, CFO of Wayfair, joining us from Boston.

26:09Carol Massar:You know, Kate, one of the other things that we've talked with you about is the physical stores. And you have noticed some encouraging early performance from the physical stores when it comes to brand engagement and cross-channel lift. As you think about, or as you kind of move from proof of concept toward potential expansion, what specific performance thresholds are you kind of focusing on and would justify accelerating the physical store growth? Yeah, it's a great question. So we look at the economics of the store itself. So purchases that are directly attributable to the store and the economics of operating that store.

26:45Carol Massar:So as you think about the overall store for Wall P &L. But one of the unique things about building stores who already have a well-established e-commerce brand is you do get to see a benefit in the area for the brand overall. But the other thing that we look at is, you know, what in sort of industry parlance, you might call the halo effect, but really sales that are attributable to folks that maybe came into the store and then, you know, left and went and bought something or, you know, had an idea about the store being in the area because they've heard more about it and therefore then shopped on our platform.

27:13Carol Massar:And we've seen that continue to hold in really nicely. We gave a stat in our updated investor presentation today that the first store, which is in Chicago, if you look at the entire state of Illinois versus the rest of the country, since the store opened, it's had a 10 percent CAGR higher than the rest of the country. Wow. And that gives you a sense of, you know, the momentum that you can get from the store. It's obviously very crude metric. Yeah. But it's an easy way to sort of explain it. So we really look at the combination of the store P &L and then the other benefits that come along with having the store.

27:45Carol Massar:Well, that makes me want to follow like what metrics would cause you to maybe remain a little bit more cautious. So like if you open another store and the metrics aren't so you're not seeing that kind of momentum that you're getting in the Chicago store, would you just say, OK, maybe it just depends on the city, the environment. Like there's a lot of specifics that go into it? Yeah, you know, I think our focus right now is on learning more about what makes a great store, right? So we have one store open. We're planning to open three more in 26. We have one opening soon in the Atlanta area, another one this summer in Columbus, and then in the fall in Denver.

28:17Carol Massar:These will be, you know, the Columbus store, for example, is 70 ,000 square feet versus the other stores are roughly around 150 ,000 square feet. So we're testing out a slightly smaller format. We're testing out different types of shopping areas where we put the store. And so we intend to learn and then continue to refine the store model based on those learnings. So let's go. We are quite excited about it as a channel.

28:39Tim Stenovec:Okay, let's go from sort of like the old school store retail model to then what you're doing with AI and layering. Don't you call

28:46Carol Massar:stores old school?

28:47Tim Stenovec:Oh, they are. I mean, they're coming back. We like the overall omnichannel

28:53Carol Massar:experience.

28:54Tim Stenovec:But how do you layer in personalization with AI? And I'm curious how you do that in a way that actually makes you more competitive in this area.

29:03Carol Massar:Yeah, we're really excited about what we can do with AI from the customer experience perspective. And we've already started some of that and piloted some of that on the site. And there's certainly more to come there. You know, I think this category is a bit unique in that respect, because it's a category that is a highly emotive category, right? It feels very personal to folks. It's not a commodity category where you're doing sort of standard replenishment. You want to get a better sense and see the actual options out there. The brand is important. Our brand is important because you want to ensure the delivery experience is high quality.

29:38Carol Massar:So we think that the category itself lends itself to bringing people to our site and engaging them in a unique way. One thing that we can do with AI is help get more personalized for your style preferences. You know, I'm sure if the three of us were to pick an end table, we'd all pick different end tables. What we'd love to do is make sure that when we land on the site, we're serving up to each of us exactly that end table that we want. Generative AI allows us to do that in a faster, more nimble way. It also allows you to play around with discovery. So if you were to go on the app today into the Discover tab, you'd see a whole catalog of images and you can create more yourself if you want that are, you know, Gen AI created that then allow you to shop the catalog based on the type of room that you're designing or the aesthetic look that you're looking for.

30:22Carol Massar:And I think that kind of engagement and interaction is really compelling in this category. So I know, Kate, if we had asked Tim, like if we were going, you, me, and him shopping for pillows, you know he would say, no more pillows. I don't know about your household, but that's what happens in my household. You're just kidding me. Fortunately, people have an insatiable demand for pillows, so we will keep selling them. Thank God, thank God. Always appreciate getting time. It is a great read on the consumer and finding out what's going on. Kate, be well. Thank you. Kate Gulliver, she's the chief financial officer of Wayfair.

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31:54Tim Stenovec:Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna, and I asked him, how can companies use AI to its fullest potential to create smarter business?

32:11Carol Massar:My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind. it. If anybody is not using AI to make their developers who write software 30 % more productive today with the goal of being 70 % more productive. So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We're happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology, is getting people to accept that there's a different way to do things.

33:01Tim Stenovec:To listen to the full conversation, visit ibm.com slash smarttalks.

33:11Carol Massar:If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day. A fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned, it's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise, and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions.

33:49Carol Massar:Their approach is grounded in experience, follow through and trust built over time. Bad days happen. And when they do, you deserve an insurance partner who understands risk, respects what you've built and is ready to help you move forward. The Cincinnati insurance companies. Let them make your bad day better. Find an independent agent at CINFIN.com. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube.

34:28Tim Stenovec:Back with us, Terry Peltz and Matthew O 'Neill, the directors and producers of Can't Look Away. Welcome back. Thanks for coming back and joining us.

34:36Carol Massar:Thanks for having us.

34:36Tim Stenovec:You know, we actually had you booked for last week and the trial got moved around a little bit because of a sick lawyer. So we do appreciate your flexibility. We're going to talk about the documentary and talk about that in the context of the trial. But first, Perry, for those who have not yet seen the documentary, the stories that you tell the lawyers that you follow, remind everybody.

34:57Carol Massar:Yeah, we have the privilege of following several families, all of whom have lost children in the case, except for one family whose child is still alive but has been deeply harmed by an overdose. But we follow families who have, unfortunately, whose children have died as a result of their exposure to social media. And we follow them as they try to seek justice for their beloved children. Yeah, and, you know, it's interesting what you guys do in this film. And we've been thinking a lot about what the world is doing, whether it's Europe, whether it's Australia. They are looking at social media and starting to put restrictions in place.

35:34Carol Massar:I am curious about as you start to watch what's happening here in the US, Mark Zuckerberg, and how important that is because there's lots of litigation. You guys have the group of lawyers that you track, but there's states looking into it. There's school systems looking into this. So how important is what happens here in this case that Mark Zuckerberg just gave some testimony for? So there's states' attorneys, generals looking into it. And in this case, and KGM, the anonymous 20-year-old who's at the center of it, is actually a client of the Social Media Victims Law Center, which were the lawyers you just heard in that clip, and are really at the forefront of this.

36:11Carol Massar:What's important to remember is that this is just one case. In this case, it's one of nine bellwether cases that has 2 ,500 other cases stacked up behind it. And all of these different efforts to bring accountability are really, really important. This isn't going to be the end of this. It's really only the beginning.

36:30Tim Stenovec:So, Perry, if there is accountability here, at least in the definition that you guys have, what could be the implications for the social media platforms and the way that kids have access to them?

36:41Carol Massar:Well, if we look globally about what's happening, there's a saying that the U.S. debates, Europe regulates, and Australia bans. So we are really behind. We are. And what we're really missing, and unfortunately, we've seen so many times that these tech CEOs are hauled into Congress. We hear lots and lots of talk and chat and nothing really gets done.

37:01Tim Stenovec:No, it's like social media clips, ironically, for the members of government to then post on their own platforms.

37:08Carol Massar:That's exactly right. We need reform here in this country. And hopefully, to Matt's point, this is the beginning of what may be some steps that take place in this country to hold these companies accountable. Yeah, it's funny. You know, not funny. We have a story in the Bloomberg about parents now getting for their kids dumb phones rather than smartphones to limit access. And even kids being like kind of pushing back. There is something going on in terms of our culture. Do you feel like in terms of society at large that there is here in the U.S.? I mean, as we watch what feels like the rest of the world being way ahead of us on this, do you feel like there's something turning here?

37:49Carol Massar:There's a change that's happening in this society for sure. the way children are interacting with social media, the way parents are trying to involve themselves in their children's lives. But you can't out-parent a trillion dollar algorithm. That's just the truth. And we are laggards. The UK has the Online Safety Act. The European Union has the Digital Services Act. Australia has the, I think it's called the Online Safety Amendment that bans 16-year-olds, anyone under the age of 16, from using social media. And critically, holds the social media companies financially accountable. Those are the legislative issues that hold the social media companies financially accountable.

38:28Carol Massar:That's what these lawsuits will do. In the end, that's what's going to matter to these companies.

38:31Tim Stenovec:But is there a way to do this? That's a tough task, like holding these companies financially accountable. Because what does that actually look like? I mean, we talk about this in the context of Australia, and that means a social media ban or technology bans. But it doesn't actually mean these companies coming out and providing some sort of payments.

38:49Carol Massar:No, and it's really difficult because these social media companies are amongst the most wealthy companies in the world, right? This is not minor.

38:58Tim Stenovec:Mark Zuckerberg, fifth wealthiest person in the world. Absolutely.

39:00Carol Massar:And they have a lot of tendrils into our Congress and into government officials. This is a really difficult thing to get done. And yet, we look at the reporting that Olivia's done. You look at the work Jonathan Haidt's done. We must have changed. We're talking about a generation here that's lost. We just talked about, there's this great column by Amanda Maul on Bloomberg, our Bloomberg Business Week team, about kind of corporate complicity in this current environment with everything that's going on and maybe CEOs not speaking up. So we watched Mark Zuckerberg, or we've been following him. What are you guys watching in terms of this case and what's crucial in terms of the outcome?

39:38Carol Massar:As you said, there's so many cases stacked up behind it. Well, for sure, this will set a tone, right? It's an important case because it is the first and it's getting a lot of attention in the media, which matters too, because people are talking about it and talking about what happened to this now 20-year-old but child when the allegations about what happened to her and her media addiction came out. And looking at the documents that are coming out in this case that show the internal communications at Facebook, even specifically when it comes to Mark Zuckerberg, to not be robotic, to say, like, change so that he seems more sincere, it suggests that they don't actually believe what they're saying.

40:17Tim Stenovec:Hey, Perry, before we go, how is history going to judge us as a society?

40:21Carol Massar:Oh, I think on this count, I don't think history judges us well. I think the one thing, though, if we look back at tobacco, we look at opioids. Tobacco took almost 40 years to get legislation. Opioids, almost 30. So we're at least at a place, it's not great, but at least we're starting to take this really seriously. And hopefully as a country, we will make some forward momentum. we can only hope because our kids' lives hang in the balance. Thank you guys for coming back. We really appreciate it. Thank you. Perry Peltz and Matthew O 'Neill, directors and producers of Can't Look Away, the case against social media, the Bloomberg original investigation, now available on all of the Bloomberg platforms.

41:01Carol Massar:So check it out. This is the Bloomberg Business Week Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

41:32Carol Massar:If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day. A fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned, it's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise, and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions.

42:10Carol Massar:Their approach is grounded in experience, follow through and trust built over time. Bad days happen. And when they do, you deserve an insurance partner who understands risk, respects what you've built and is ready to help you move forward. The Cincinnati Insurance Companies. Let them make your bad day better. Find an independent agent at CINFIN.com.

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