The news: Wayfair delivered its first annual sales gain since 2020 even as a sluggish housing market, elevated interest rates, and steep tariffs on furniture imports hurt demand. The retailer beat profit expectations, met revenue forecasts, and posted its third straight quarter of new customer growth.

Though it hasn’t posted an annual net profit since 2020, Wayfair made progress on profitability in Q4, reporting adjusted EBITDA of $224 million, outpacing the $200 million analysts expected.

The strategy: While tariffs have pressured many home furnishings retailers, Wayfair’s marketplace model provides added flexibility. The company has urged suppliers to absorb some tariff-related costs, shift production to lower-tariff countries, and introduce higher-priced products to offset the impact. Those moves helped margins tick up YoY.

At the same time, Wayfair’s efforts to boost demand are beginning to pay off. The company is expanding its physical footprint to build brand awareness and doubling down on customer experience initiatives, including its rewards program; Wayfair Verified, a curated quality-assurance label designed to boost shopper confidence; and Muse, its AI-powered inspiration tool that generates photorealistic, shoppable room scenes within the Discover tab to help turn browsing into buying. Still, momentum is not uniform as its active customer base declined 0.5% YoY.

Implications for retailers: Offering a broad assortment that spans sofas priced at a few hundred dollars to those north of $40,000 allows Wayfair to meet consumers where they are. That breadth proved valuable in a year when shoppers were highly value-conscious and, in some cases, pulled forward purchases to avoid tariff-driven price increases.

While Wayfair’s operational flexibility and sharper demand generation are emerging as competitive advantages, macro headwinds persist. With its active customer base edging down, sustaining growth will require not only margin discipline but also steadier customer acquisition and retention in a still-fragile housing market.

Go further: For more on Wayfair's performance, check out our Live Q4 Retail & Ecommerce Earnings Tracker.