It’s been a big week for retail…
Wayfair, the online home goods retailer, announced today it was laying off close to 900 employees. This comes after the company announced a hiring freeze back in May.
The layoffs represent about 5% of the company’s global workforce and 10% of its corporate team. 400 jobs are being cut in Boston alone at the company’s HQ).
This announcement came as an alarm to investors, causing the stock to plummet…
Wayfair’s Stock is Crashing…
For the first two years of the COVID-19 pandemic, the company was profitable. According to The Wall Street Journal, Wayfair’s stock fell by over 17% Friday morning.
Wayfair has been struggling to keep customers after a spike at the start of the pandemic. Earlier in August, Wayfair said it lost 24% of active customers since last summer.
Recent regulatory filings revealed that the job cuts will help Wayfair “manage operating expenses and realign investment priorities.”
CEO Niraj Shah wrote in an letter to employees that the layoffs were a “difficult decision” resulting from Covid-19.
“We were seeing the tailwinds of the pandemic accelerate the adoption of e-commerce shopping, and I personally pushed hard to hire a strong team to support that growth,” Shah wrote. “This year, that growth has not materialized as we had anticipated. Our team is too large for the environment we are now in, and unfortunately we need to adjust.”
Is This the Beginning of the End for Wayfair?
Wayfair had flourished at the beginning of the pandemic, when demand for inexpensive furniture and other home decor upgrades that it broke global supply chains and caused lengthy shipment delays.
But fast forward to the present economy, inflation has killed discretionary spending for middle-income shoppers, who have pulled back their purchases to focus on paying for necessities like groceries, gas and rent. Wealthier customers have shifted their spending from furniture and other goods to travel and services. Mortgage rates have climbed significantly, cutting into demand for new homes as well (a key demographic for the company).
Overall, Wayfair posted a net loss of $378 million during the quarter. Wayfair’s shares have lost about 70% of their value since the start of the year. The layoffs will cost Wayfair between $30 million to $40 million for employee severance and benefits.