Neeraj Shah, CEO of Wayfair
Ashley Espinal | CNBC
WayfairShares jumped more than 20% on Friday after the retail giant said it would lay off about 1,750 employees, or 10% of its global workforce, to support cost-cutting across the company.
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 news release.
Wayfair has already begun layoffs in Europe, and employees in North America will be notified of their employment status on Friday, Wayfair co-founder and chief executive officer Neeraj Shah wrote to employees in a company-wide email Friday morning. The retailer will offer severance pay to employees based on each individual’s circumstances, such as country, tenure and level, Shah wrote.
The company said it expects between $68 million and $78 million in expenses, mostly related to severance and employee benefits, mainly in the first quarter of 2023.
Retail giants like Wayfair have been forced to accept a setback in their gains in the pandemic era as consumers shift their spending priorities away from categories like home furnishings. The online furniture retailer, which emerged as one of the winners of the pandemic as consumers spent more on home decor and office furniture, has since fought supply chain issues that led to order delays and customer frustration.
Wayfair reported a 9% year-over-year revenue decline and a $286 million loss in the third quarter of 2022. The sharp drop in recent quarters comes after the Massachusetts-based retail giant raised revenue by 55% in 2020 to $14.1 billion.
“Unfortunately, along the way, we overcame some difficult things, lost sight of some of our fundamentals and simply grew too big,” Shah said in an email to employees. “On an operational basis, we can see and feel that we are not as agile as we used to be or should be.”
Shah wrote that the company’s operating expenses relative to its revenue rose to 17% last year after hovering between 10% and 11% for most of the company’s 20-year history. In addition to the layoffs, he added, the retailer has cut spending on advertising, 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 a press release.
“Today’s changes are mainly about reducing the level of management, right-sizing in certain places and reorganizing to be more efficient,” Shah said.
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