As a response to sales reductions caused in part by high inflation, online retailer Wayfair is eliminating 870 employees, including 400 in its home city of Boston.
The job layoffs were disclosed in a memo sent on Friday morning to all 18,000 workers by CEO Niraj Shah. While those discussions had already started with staff in Europe and Asia, all North American workers were scheduled to learn if their employment are affected on Friday.
According to region, length of service, and job level, the corporation is providing severance. For instance, Wayfair is providing a minimum of 10 weeks of pay and continuing to vest employee stock through the month of October in the US.
About 5% of the company’s global staff and 10% of its corporate team will be laid go. The corporation anticipates spending $30 million to $40 million on the personnel reduction; the majority of this sum will go toward severance fees.
Wayfair made a similar number of job cuts in February 2020, laying off 550 people worldwide, including 350 in Boston. For one of the state’s few consumer-focused digital companies, that was a turning point.
However, Wayfair profited greatly in the early stages of the COVID-19 pandemic as many individuals chose to spend their money on home improvements rather than going to physical retailers. Executives at Wayfair anticipated that revenue growth would persist through 2022. However, consumer spending changed and revenue fell as inflation increased. The company’s stock peaked at about $200 per share at the beginning of the year, but it has since fallen sharply and, as of Friday morning, was trading in the low $70 range.
To control costs, the corporation had previously implemented a hiring restriction in May. Additionally, due to more general economic issues, the tech sector as a whole has been preparing for impact.
The pandemic was accelerating the adoption of online shopping, and I personally worked hard to build a solid staff to support that expansion, Shah stated. “That growth has not occurred this year as expected, unfortunately. Unfortunately, we have to make adjustments because our team is too big for the situation we are in right now.
According to Shah, the personnel adjustments fell into three categories: reducing the number of management levels, better matching the company’s activities to its strategic aims, and modifying sectors that expanded faster than the present revenue trajectory could support.
Just two weeks have passed since Wayfair released its poor second quarter earnings. On August 4, Wayfair said that its total net revenue for the months of April through June declined 14.9% from the same period in 2017 to $3.3 billion, while US net revenue fell 9.7% to $2.8 billion. As a result, the business reported a $378 million loss for the quarter as opposed to a $131 million profit the previous year.
More concerning, the number of active customers, or the number of people who purchased an item from Wayfair’s websites at least once in the previous 12 months, fell from 31 million to 24 million.
On August 4, Shah told analysts that when petrol and grocery store prices increase, Wayfair’s consumers are “being more selective about where their discretionary money are going.” Additionally, Wayfair has seen that consumers are generally transferring their discretionary spending away from commodities and toward services, especially when it comes to travel-related expenses.
Shah stated that Wayfair management is committed to leading the business “in a financially prudent manner” in his memo to staff on Friday.
While continuing to make aggressive investments in the future, Shah stated, “We are actively leading Wayfair towards a level of profitability that will allow us to dictate our own destiny.” The macro environment doesn’t alter our opinion of the size of the opportunity, and we are taking deliberate steps to take advantage of it.
Co-founder Steve Conine and I “are as confident about the future as ever,” he continued.