In this photo iIllustration, the logo of the online e-commerce company Wish is displayed on the screen of an iPhone.
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Wish CEO Peter Szulczewski opened his letter to shareholders last week in a way that is sure to scare off investors already worried about a company that had struggled since going public just eight months earlier.
“After a strong start into the second quarter of 2021, demand has slowed due to a number of headwinds,” Szulczewski wrote in the first sentence of the letter published late Thursday alongside Wish’s earnings report.
Wish stock plunged 20% on Friday and continued to slide on Monday, losing another 9% to close at $ 6.87. The company, which operates a discount e-commerce app, debuted at $ 24 per share in December and traded at $ 31.19 on February 1. The stock has since lost more than three quarters of its value.
Wish reported a 6.4% year-over-year decline in quarterly revenue to $ 656 million, while analysts expected a slight increase. The net loss increased tenfold to $ 111 million and Monthly Active Users (MAUs) decreased 22% to 90 million.
The company attributed the disappointing sales figures to the reopening of the economy and a return to physical shopping. Similar announcements came from ecommerce companies Amazon and Wayfair, which reported weaker-than-expected revenue, and Etsy, which missed estimates with its forecast.
However, Wish’s business has deteriorated much more dramatically. In the third paragraph of his letter, Szulczewski admitted that more users were leaving the app than expected.
“From a macro perspective, daily user activity and active buyers on our platform decreased more than we expected than we expected, particularly in the US, France and Italy – three of our largest markets,” he wrote.
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App installs were down 13% from the previous quarter and the average time spent on the app was down 15%, Wish said. All of this resulted in a 29% drop in marketplace sales year over year. Part of these losses were offset by the logistics business, which grew 126%.
Meanwhile, advertising costs rose faster than expected, which hurt Wish’s marketing efficiency.
The problems started in March when Wish announced in its fourth quarter earnings report that MAUs were down 10% globally from a year earlier. In its next financial report in May, Wish said MAUs were down more than 7% in the first quarter. The following month, CFO Rajat Bahri said he would be leaving the company.
William Blair analysts downgraded the stock to the equivalent of a hold on Friday, finding a consistent pattern of sub-par Wall Street estimates.
“Since going public, reported results have missed Street (and our model) expectations on key engagement metrics (i.e. MAUs) for three consecutive quarters,” the analysts wrote. “Given the macro headwinds and company-specific headwinds that are specific to user engagement and retention, we don’t have a good look at our forecast.”
Wish said it is making some “big changes” in the way it works. The company plans to improve product quality, make the shopping experience more fun, and improve app performance. It also mentioned two recent hires by Google: Farhang Kassaei as Chief Technology Officer and Tarun Jain as Product Chief.
Investors looking to turn the company around will need to be patient as the financial numbers are unlikely to show any tangible improvements for a year, the company said.
“We do not expect these new initiatives to make a significant contribution to positive annual results until the second half of 2022,” wrote Szulczewski.
WATCH: Check out CNBC’s full interview with Wish CEO Peter Szulczewski