Etsy Stock Drops as Company Cuts 11% of Staff, Citing Tough Environment

Etsy Announces Workforce Restructuring Amid Challenging Environment

In a move to restructure its business and streamline costs, e-commerce giant Etsy has announced that it will be laying off 11% of its workforce during the holiday season. The company cites a “very challenging” macro and competitive environment as the reason behind the decision.

Workforce Reduction and Impact

Approximately 225 employees will be cut from Etsy’s workforce, bringing the headcount for the core Etsy marketplace to around 1,770 people. This number is similar to the company’s headcount in early 2022 and above 2020 levels.

Etsy CEO Josh Silverman acknowledged the growth of the marketplace since 2019 but emphasized the need for change in light of current realities. He stated, “We are operating in a very challenging macro and competitive environment, and [gross merchandise sales] has remained essentially flat since 2021. This means we are not bringing our sellers more sales, which is the single most important thing we can do for them. At the same time, employee expenses have grown, even as we have introduced significant cost-cutting measures and adjusted or paused hiring plans. This is ultimately not a sustainable trajectory and we must change it.”

Updated Fourth-Quarter Guidance

Alongside the announcement of workforce layoffs, Etsy also provided updated fourth-quarter guidance. The company now expects gross merchandise sales to decline between 1% and 2% compared to the year-ago quarter. However, revenue is projected to increase between 2% and 3%. The adjusted EBITDA margin is expected to be between 27% and 28%, up from the previous guidance of 26% to 27%.

Market Reaction

Following the announcement, shares of Etsy fell 7%. Despite the decline, Etsy remains focused on reigniting growth and driving sales for its nearly 7 million sellers worldwide. Etsy CEO Josh Silverman stated, “Today, we announced that we are reorganizing our internal structure so that we can double down on these efforts, which unfortunately means saying goodbye to approximately 225 of our colleagues.”

Layoffs in the Retail Industry

Etsy’s layoffs come just days after toymaker Hasbro announced its own workforce reduction of 1,100 employees due to soft sales during the holiday shopping season. The retail industry continues to face challenges as consumer behavior evolves and competition intensifies.

Cost and Timeline of Restructuring

The layoffs at Etsy are estimated to cost between $25 million and $30 million. The majority of these costs will be allocated towards severance payments, employee benefits, and other related expenses. Over time, the restructuring is expected to deliver operational efficiencies, cost savings, and/or cost avoidance, particularly in salary costs and benefits.

The restructuring process is set to be completed by the end of the first quarter of 2024. As part of the restructuring, Etsy’s chief marketing officer, Ryan Scott, will be leaving the company, and his position will be consolidated under the chief operating officer role. Additionally, Etsy’s chief human resources officer will be replaced by Toni Thompson, the company’s current vice president of global people and talent strategy.

Support for Impacted Employees

Considering that the layoffs occur during the holiday season when many employees are shopping for gifts, Etsy has committed to paying impacted staff through at least January 2. Severance packages will include 16 weeks of base pay, plus one week for each full year of service. Impacted employees will also receive extended COBRA health insurance benefits and the option to keep their company laptop.

As Etsy navigates the challenges of the current retail landscape, the company remains dedicated to supporting its sellers and delivering value to all stakeholders.