Wayfair Announces Layoffs, Shares Surge
Job Cuts and Cost Savings
Wayfair, the online furniture retailer, has revealed plans to lay off 1,650 employees, which accounts for approximately 13 percent of its workforce. The company expects these job cuts to result in annual cost savings of $280 million. CEO Niraj Shah stated that the goal is to maximize free cash flow and potentially reduce the total share count. In a note to employees, Shah admitted that the company had gone overboard in hiring during a strong economic period and had strayed from its core principles.
Previous Layoffs and Workforce Size
This is not the first time Wayfair has implemented layoffs. In 2022 and 2023, the company announced rounds of job cuts, eliminating 1,750 positions, or about 10 percent of its workforce. As of the end of 2022, Wayfair had a global workforce of approximately 17,505 employees.
Positive Market Response
The news of the layoffs caused Wayfair’s shares to surge by as much as 15 percent. Analyst Bobby Griffin from Raymond James praised the move as an impressive step towards optimizing the business and positioning it for sustained profitable growth.
Industry Trends
Wayfair’s decision to downsize comes in the wake of department store chain Macy’s announcement that it would cut 2,350 jobs and close five stores. These actions reflect the challenges faced by retailers in an evolving market.
Financial Outlook
Wayfair has set a target of delivering over $600 million of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024. Analysts’ average expectation is $479.3 million. The company also anticipates incurring costs of approximately $70 million to $80 million, primarily related to employee severance and benefits, with most of these expenses recorded in the first quarter of 2024.
Adapting to Changing Consumer Behavior
Wayfair has faced challenges in recent years, with net revenue declining for nearly two years as customers redirected their spending towards travel and entertainment. In November, despite an increase in quarterly revenue, Wayfair fell short of meeting analyst estimates.
