Online home furnishings retailer Wayfair is cutting 870 jobs, including 400 in its hometown of Boston, as the company reacts to declining sales caused in part by steep inflation.
Chief Executive Officer Niraj Shah announced the job cuts in a memo to the 18,000 employees on Friday morning. All North American workers were to be told on Friday if their jobs would be affected, while those talks had already begun with employees in Europe and Asia.
The company offers compensation based on geography, tenure and job level. In the US, for example, Wayfair offers a minimum of 10 weeks of pay, as well as ongoing employee stock vesting through October.
The layoffs represent about 5 percent of the company’s global workforce and 10 percent of its corporate team. The company expects to spend between $30 million and $40 million in connection with downsizing its workforce, a figure that primarily reflects severance costs.
Some employees took to Twitter to share emails announcing their termination. One employee said that she had just been hired in June, only to be fired two months later.
Others turned to LinkedIn in search of new opportunities.
“This news is devastating and could not come at a worse time for me and my family as we are literally two months away from closing on our dream home,” Erick Miles, a former Wayfair human resources professional, wrote, according to his profile. . “For the affected Wayfairians, this hurts now, but we’ll heal later!”
In February 2020, Wayfair had a similar size layoff, eliminating 550 workers globally, including 350 in Boston. That was a reckoning moment for one of the few consumer-focused tech giants in the state.
But Wayfair benefited significantly during the early part of the COVID-19 pandemic, as many people refrained from shopping in physical stores and spent money fixing up their homes. Wayfair executives expected revenue growth to continue through 2022. But as inflation rose, consumer spending shifted and revenues declined. The company’s shares were trading at nearly $200 a share at the start of the year, but have taken a steep drop since then and were trading in the low $70 range as of Friday morning.
The company had already initiated a hiring freeze in May, to control expenses. And while the tech industry has been bracing for impact due to broader economic issues, Wayfair has specific challenges for its retail business.
“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 big for the environment we find ourselves in now and unfortunately we have to adapt.”
Shah explained that changes to the workforce fall into three categories: lowering management levels, better aligning the company’s work with its strategic priorities, and adjusting areas that grew faster than the company’s trajectory can support. current income.
The announcement comes just two weeks after Wayfair reported disappointing second-quarter earnings. On Aug. 4, Wayfair said its total net income for the April-June period fell 14.9 percent from the same period a year earlier to $3.3 billion; US net income, meanwhile, fell 9.7 percent to $2.8 billion. As a result, the company posted a loss of $378 million in the quarter, compared to a profit of $131 million a year earlier.
Perhaps most alarmingly, the number of active customers — essentially the number of people who have bought an item on Wayfair sites at least once in the previous 12 months — has dropped to 24 million from 31 million a year ago.
On Aug. 4, Shah told analysts that Wayfair customers are “being more deliberate about where their discretionary dollars are going” as gas station and grocery store prices rise. Wayfair has also noticed that customers across the board are shifting their discretionary spending away from goods to services, such as travel-related expenses.
In his Friday memo to employees, Shah wrote that Wayfair’s management is committed to running the company “in a financially responsible manner.”
“We are actively navigating Wayfair to a level of profitability that will allow us to control our own destiny, while continuing to invest aggressively in the future,” Shah said. “The macro environment does not change our belief in the size of the opportunity, and we are purposefully moving to take advantage of that opportunity.”
He added that he and co-founder Steve Conine “remain as confident in the future as ever.”
Diti Kohli and Collin Robisheaux contributed to this report.
Jon Chesto can be reached at email@example.com. Follow him on Twitter @jonchesto.