Niraj Shah, CEO, Wayfair
Ashlee Espinal | CNBC
WayfairThe stock price jumped more than 20% on Friday after the retail giant announced it would lay off around 1,750 employees, or 10% of its global workforce, to support cost cuts enterprise-wide.
The announcement marks Wayfair’s second round of job cuts in less than six months since the retailer laid off about 5% of its workforce in August. Executives expect the two rounds of layoffs to save $750 million a year, according to a press release.
Wayfair has already started layoffs in Europe, and employees in North America will receive notice of their employment status on Friday, Wayfair co-founder and CEO Niraj Shah wrote to staff in an email Friday morning. enterprise-wide. The retailer will offer employees severance pay based on each individual’s circumstances, such as country, tenure and level, Shah wrote.
The company said it expects to incur between $68 million and $78 million in costs, primarily related to severance and employee benefits, primarily in the first quarter of 2023.
Retail giants like Wayfair have been forced to come to terms with the reverse of their pandemic-era gains as consumers shift their spending priorities away from categories like home furnishings. The online furniture retailer, which has been one of the winners of the pandemic, with consumers spending more on home decor and office furniture, has since struggled with supply chain issues that have led to order delays and frustrated customers.
Wayfair reported a 9% year-over-year decline in revenue and a loss of $286 million in the third quarter of 2022. Sharp declines in recent quarters come after the retail giant Massachusetts-based retail saw a 55% increase in revenue in 2020 to $14.1 billion.
“Unfortunately, along the way, we over-complicated things, lost sight of some of our fundamentals and just got too big,” Shah said in the email to staff. “Operationally, we can see and feel that we are not as nimble as we used to be or need to be.”
Shah wrote that the company’s operating expenses relative to its revenue have risen 17% in the past year after being around 10% to 11% for most of its 20-year run. company history. In addition to the layoffs, he said the retailer has cut costs for advertising, insurance policies, janitorial services and software licensing.
The company now expects to return to Adjusted EBITDA profitability earlier in 2023 through these cost reduction efforts, according to the press release.
“The changes today are largely about reducing management levels, downsizing in some places and reorganizing to be more efficient,” Shah said.
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