Wayfair stock climbs after online retailer lays off 1,750 workers
Niraj Shah, CEO, Wayfair
Ashlee Espinal | CNBC
Wayfairstock price jumped more than 20% on Friday after the retail giant said it would let go about 1,750 workers, or 10% of its global workforce, to support cost-cutting across the company.
The news marks Wayfair’s second round of job cuts in less than six months since the retailer let go of about 5% of its workforce in August. Executives expect the two rounds of layoffs to save $750 million a year, according to a news release.
Wayfair has already begun layoffs in Europe, and employees in North America will be notified Friday of their employment status, Wayfair co-founder and CEO Niraj Shah wrote in an email to employees nationwide. the company on Friday morning. The retailer offers a segmentation to employees based on each individual’s location, such as country, tenure and grade, Shah wrote.
The company said it expects between $68 million and $78 million in costs, mostly related to employee severance and benefits, primarily within the first quarter of 2023.
Retail giants like Wayfair have had to settle for a setback in their gains since the pandemic as consumers shift their spending priorities away from categories such as home furnishings. The online furniture retailer, which was one of the winners of the pandemic as consumers spent more on home decor and office furniture, has since struggled with issues supply chain that led to order delays and frustrated customers.
Wayfair reported a 9% year-over-year revenue decline and a loss of $286 million in the third quarter of 2022. The sharp decline in past quarters comes after the Massachusetts-based retail giant a 55% jump in its revenue in 2020 to $14.1 billion.
“Unfortunately, along the way, we over complicated things, lost sight of some of our fundamentals and got too big,” Shah said in the email to employees. “On an operational basis, we see and feel that we are not as agile as we were or needed to be.”
Shah wrote that the company’s operating expenses relative to its revenue grew to 17% in the past year after sitting at around 10% to 11% for most of the year. some of the company’s 20-year history. In addition to layoffs, he said the retailer has reduced advertising costs, insurance policies, janitorial services and software licenses.
The company now expects to return to adjusted EBITDA profitability earlier in 2023 as a result of these cost-cutting efforts, according to the press release.
“The changes today are largely about reducing management layers, measuring accurately in specific areas, and reorganizing to be more efficient,” said Shah.