Retail Credit Research: Wayfair, you've got just what I need!

Research evidence excerpt

M

Idea

August 5, 2026 05:41 PM GMT

Retail Credit Research | North America

Morgan Stanley & Co. LLC

Jenna L Giannelli

Credit Analyst

Wayfair, you've got just what I

need!

Roopi Bhangu

Credit Analyst

Exhibit 1 : Fundamental & Valuation View

Wayfair continued to gain share and deliver operating leverage

in 2Q, with sales, GM and adj. EBITDA ahead of expectations.

Most notable, in our view, was the 3Q guide for HSD sales

growth, above our MSD expectations. We maintain our

recommendation to buy across the curve, supported by

improving FCF generation and a positive credit trajectory. The

equity closed ~30% higher, while the bonds rose ~0.3 to 0.9

points.

Fundamental Outlook

Valuation View

Trade Recommendation

Preferred Curve Position

Constructive

Cheap

Buy secured notes

Buy 2030s / 2032s / 2034s; own 2029s for lower beta

Source: Morgan Stanley Research

Key Takeaways

2Q strengthens our conviction in Wayfair’s continued share-gains, with sales

+7.5% YoY, GM of 30.0%, adj. EBITDA +18% and U.S. revenue +8.7%, as the

company continues to outperform the category.

The HSD 3Q guide was the most notable positive, in our view, supporting

continued growth and leverage without assumed category improvement.

Strong cash generation and the retirement of the 2028 converts further

improves the credit profile, with only $268mn of '26 & '27 converts remaining.

We were pleased to see that growth is broadening, with specialty brands nearly

+20%, Perigold >35% and stores attracting >50% new-to-file customers.

We continue to recommend W bonds across the curve given the 1L collateral

with ~6.0% all-in yields, and we view it as a core holding.

Our take on the quarter (+): 2Q was a strong, broad-based print for Wayfair.

Sales rose 7.5% YoY to $3.519bn (vs. $3.470bn cons) and adj. EBITDA reached

$242mn (vs. $230mn cons). More important than the headline beat, in our view, was

the quality of growth. Orders increased 6%, active customers grew >3%, and U.S.

revenue rose 8.7% against a category mgmt. characterized as flat to slightly

positive, supporting our expectation that improvements in Wayfair’s core value

proposition and newer growth initiatives are driving sustained share gains. Gross

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