E-commerce stocks plummet as consumers pull back online spending

Key Points
  • Shares of Etsy, Shopify, Wayfair, Poshmark and a number of other e-commerce retailers fell Thursday.
  • E-commerce transactions have declined 1.8% from a year ago, while in-store sales rose 10%, Mastercard SpendingPulse said in a new report.
  • The decline in online retailers came as a broader sell-off walloped stock markets Thursday.

In this article

The Etsy website displayed on a laptop.
Gabby Jones | Bloomberg | Getty Images

Shoppers are eager to head back to brick-and-mortar stores, while inflation is stoking fears that consumers are pulling back their spending on some items to still afford the essentials.

That combination spells bad news for many e-commerce-focused retailers, and their stocks tumbled amid a broader market sell-off Thursday as investors feared their growth could be screeching to a halt and profits could be harder to come by.

Wayfair's stock dropped 26%, touching a fresh 52-week low, after the online furniture retailer reported wider-than-expected losses in the first quarter and logged fewer active customers.

Consumer spending strong across broad range of categories, says Mastercard's Steve Sadove
Consumer spending strong across broad range of categories, says Mastercard's Steve Sadove

Wayfair Chief Executive Officer Niraj Shah told analysts on a conference call Thursday morning that the "typical seasonal pattern of gradually building demand" that the business is used to tracking has been transpiring in a more "muted" fashion.

He also said he has noticed more shoppers are devoting a larger share of their wallets to nondiscretionary categories and "reprioritizing experiences like travel."

Read more: Surging prices force consumers to ask: Can I live without it?

Etsy shares tumbled 17% on the heels of the online marketplace issuing disappointing guidance for the second quarter. Shopify stock fell nearly 15% after it forecast that revenue growth would be lower in the first half of the year, as it navigates tough Covid pandemic-era comparisons.

Shares of The RealReal and Farfetch both fell around 11% Thursday, while those of Peloton and Revolve each dropped about 9%, and Warby Parker and ThredUp fell 8%. Poshmark, an online site for shopping secondhand, saw its shares end Thursday down about 4%.

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

In a report issued Thursday morning, Mastercard SpendingPulse said total retail sales in the United States, excluding sales of autos, grew 7.2% from the prior year. Within that, e-commerce transactions dropped 1.8%, while in-store sales rose 10%, it said.

Read more: Nasdaq drops as tech experiences brutal selloff

A week ago, e-commerce behemoth Amazon set the tone for waning momentum and downbeat outlooks. The company logged the slowest revenue growth since the dot-com bust in 2001 and issued a bleak forecast, attributing much of the slowdown to macroeconomic conditions and Russia's invasion of Ukraine.

Amazon shares ended Thursday trading down 8%.

Gordon Haskett analyst Chuck Grom wrote in a note to clients that he continues to collect evidence that consumers are just beginning to push back on rising prices, "which will soon be a potential conundrum for the retail space."

A number of these companies — including Peloton, Poshmark, Thredup and Allbirds — are set to report quarterly results next week. Analysts and investors will be looking closely for any signs of a spending pullback.

Having the inventory to meet consumer demand is still a challenge, says Hanesbrands CEO
Having the inventory to meet consumer demand is still a challenge, says Hanesbrands CEO