Dive Brief:
- Wayfair has laid off about 1,650 employees, the company said Friday. The online home decor retailer said the cuts represent about 19% of its corporate team and 13% of its global workforce.
- The move is expected to give the company more than $280 million in annualized cost savings. About $150 million of that will come from cash compensation savings. However, the restructuring will likely cost Wayfair approximately $70 million to $80 million in severance and benefits costs, most of which are anticipated to be incurred in the first quarter.
- While CEO Niraj Shah in an open letter to employees pointed to "many things at the company that are going well," including gaining share with customers and making progress to operate more efficiently, the retailer has faced challenges. The company “went overboard” with hiring during the height of the pandemic, when the retailer’s annualized sales doubled to $18 billion from $9 billion as people spent more on their homes, Shah said.
Dive Insight:
This is Wayfair’s third round of restructuring since the summer of 2022. The company laid off 870 employees in August of that year. Last January, an additional 1,750 people were let go. This time, Shah said they decided to err on the side of having too few people versus too many.
“Each time we used our best judgment, identified the cost target we needed to hit, and believed we were resizing to the right point,” Shah said Friday. “In many ways, having too many great people is worse than having too few. 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 is what we have been experiencing and what we need to end.”
Those affected by this week’s layoffs will receive severance, employee assistance resources and networking support, along with other unspecified benefits and resources. Wayfair did not immediately respond to Retail Dive’s request for comment on Friday regarding details about the severance offered to departing employees.
The home sector of retail remains down. At the height of the pandemic, people spent heavily and freely — bolstered by federal stimulus money — to add comfort and function to their homes during stay-at-home orders. But as those orders were lifted and in-person work, school and leisure activities resumed, consumer spending on home decor dropped off.
In a Jan. 11 note, analysts with Wedbush led by Seth Basham said home furnishings retail will likely see a modest rebound this year. Wedbush projects low single-digit year-over-year growth for the industry this year due to housing market rebounds, improving consumer confidence and a more stable competitive environment. The online channel is also expected to outperform the offline market in 2024 by 300 to 400 basis points, and Wayfair is expected to capture some of that share, according to Wedbush.
“Although persistent category weakness makes revenue growth challenging, we remain encouraged by the share gains we continue to see,” Shah said. “Based on today's announcement, in a hypothetical flat revenue environment – inclusive of the rebuilt roles – we would now expect to deliver over $600 million of adjusted EBITDA in 2024.”
Wayfair’s third-quarter revenue rose 3.7% year over year to $2.9 billion, the first increase in that metric after nine consecutive quarters of declines. The retailer’s operating loss fell 59% year over year to $152 million and its net loss fell 42% to $163 million.
