fair way is cutting 13% of its global workforce as the digital home goods retailer continues its efforts to trim its structure, eliminate layers of management and reduce costs after going overboard with corporate hiring during the Covid pandemic, it announced on Friday.
The company plans to lay off about 1,650 employees, including 19% of its corporate team, focusing on people in management and leadership positions, Wayfair said.
The restructuring, the third Wayfair has implemented since summer 2022, is expected to save the company about $280 million, he said.
Wayfair shares rose 15% in premarket trading after the news was announced.
“The changes announced today reflect a return to our core principles on resource allocation,” Wayfair co-founder and CEO Niraj Shah said in a statement. “While persistent category weakness hampers revenue growth, we remain encouraged by the share gains we continue to see.”
Layoffs come later Hasbro, Etsy and Macy's all announced cuts to their workforce as retailers face slowing demand and an uncertain economy. At the height of the holiday shopping season in mid-December, Hasbro and Etsy announced staff reductions of 1,100 and 225 workers, respectively, and on Thursday, Macy's said it plans to cut more than 2,300 employees, or 3.5% of its workforce. The department store retailer also plans to close five stores.
Wayfair said the cuts were not related to fourth-quarter performance but were rather a proactive measure to get the company back to its core structure.
During the pandemic, Wayfair saw its business explode as homebound consumers used stimulus dollars and savings to splurge on home items like furniture and decor. It saw annualized sales go from $9 billion to $18 billion “almost overnight” and needed to increase its workforce to meet demand, Shah said in a memo to employees Friday.
However, as the impact of the virus began to subside, the broader home goods sector began to experience a decline in demand. As a result, Wayfair has had to make cuts to ensure its staffing levels are commensurate with the amount of business it does.
“By mid-2022, it was clear that we were in a period of crisis. It was also clear that we had overextended corporate hiring during Covid,” Shah explained. “As everyone here knows, we've had two major corporate restructurings since 2022 to try to right-size. Each time we used our best judgment, identified the cost target we needed to hit, and believed we were right-sizing.
“After each downsizing, we've accomplished more goals faster. I think we need to stay focused as a company on what small, committed teams can accomplish. In many ways, having too many great people is worse than having too few,” he said. saying. “With too few, you get a lot done quickly, but you may not get everything done that you want. But having too many causes inefficiency, coordination costs, and investments in lower-return activities. That's what we've been experiencing and that must end.”
In recent reductions, the company sought to eliminate senior people in certain areas who had “too much time” and spent that time meeting with other senior leaders rather than actually executing, he said.
Wayfair also wants to reduce the ratio of engineers to engineering partners, such as those in business, product, design, research and analysis roles, because an excess of those positions will not “create better technology outcomes but will do the opposite.” Shah said.
“We are gaining momentum thanks to everyone's dedicated efforts. Our toughest stretch is behind us. And I believe our best year is right in front of us,” Shah said.
The company plans to rebuild parts of its workforce throughout the year, but will focus on lower-ranking positions and positions that execute actions, rather than leadership roles that oversee those actions, the company said.
If revenue remains stable this year for Wayfair, the company expects to generate $600 million of adjusted EBITDA in 2024, up from a previous expectation of $450 million.
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