wayfair plans to cut as many as 730 jobs, or about 3% of its global workforce, as it exits the German market and focuses on new growth drivers such as brick-and-mortar retail, the company announced on Friday.
Finance chief Kate Gulliver said in an interview with CNBC that about half of the affected employees have the option of staying with Wayfair if they agree to move to London, Boston or other locations where the company is based. He said there is. Affected positions include those in Wayfair’s customer service and warehouse teams, as well as corporate positions, she said.
In a memo to employees shared with CNBC, Founder and CEO Niraj Shah said that expanding Wayfair’s operations in Germany would take too much time and money, so the company’s He said the funds should be put to better use in other growth initiatives.
“Increasing our market share and improving our unit economics in the German market is driven by the weak macroeconomic conditions for our category in Germany, the low maturity of our products, our current brand awareness, our This proved difficult due to factors such as scale limitations,” Shah wrote.
“Our recent assessment shows that achieving market-leading growth in Germany remains a long and expensive endeavor that is increasingly lagging behind the potential benefits seen in other areas. We have concluded that to have the greatest impact on our resources, we will reallocate our efforts to areas with strong long-term potential where our current efforts are showing significant progress. “We have made the difficult but necessary decision to do so,” he wrote.
Shares fell about 3% in early trading Friday.
Germany, where Wayfair has operated for 15 years, accounts for a “low single-digit percentage” of Wayfair’s revenue, customers and orders, Gulliver said. The restructuring is expected to cost between $102 million and $111 million, including $40 million to $44 million in employee-related costs such as severance, benefits and relocation costs. $62 million to $67 million, including approximately $62 million to $67 million of non-cash costs related to facility closures. Wayfair described other wind-down activities in its securities filing.
The company plans to make these payments over the next 12 months, with payments expected to occur between the fourth quarter of 2024 and the first quarter of 2025, with the six-month period scheduled to end at the end of March. .
Wayfair said in a securities filing that it plans to reinvest savings from the restructuring into other core initiatives, primarily its brick-and-mortar retail plans and remaining international markets. Gulliver said the company’s guidelines have not changed.
Friday’s layoffs are Wayfair’s fourth since summer 2022, but the move is less about cutting costs and more about reallocating resources to initiatives that actually benefit the company. said Gulliver.
“We’re not doing this because we’re saying we need a cost efficiency initiative. That’s why we need to look for more costs, and that’s why we identified Germany,” Gulliver said. said. “We are already making progress towards improving ROI, and we think we can continue to invest in the future. So this is a prioritization of investments, and (we) see some very exciting initiatives. We are pursuing opportunities in areas such as the UK and Canada. ”
These efforts include Wayfair’s expansion into brick-and-mortar stores, which began in earnest in May with the opening of its first store of the same name in a Chicago suburb. Since the store opened, the company has enjoyed what Gulliver describes as a “halo effect,” with increased online sales to customers who live near the store. Gulliver said the company plans to open one or two more stores in the U.S. “soon” and hopes to expand its doors to international markets such as Canada and the United Kingdom.
“Of course, we want to be successful in the U.S. first,” Gulliver said. “But we’re excited about the possibilities over time.”
Still, brick-and-mortar retail can be a huge capital investment. And Wayfair hasn’t posted an annual net profit since 2020.
Wayfair’s decision comes as the company seeks to boost sales growth amid a slump in the housing market due to weak demand across the housing market. Sales for the three months ended September 30 were down 2% to $2.9 billion.
“It’s always difficult to make decisions that affect humans,” she said. “We care very much about our team and are very grateful for their work, but we believe this is the right next step for the company to focus on higher ROI priorities.” .”
