Wayfair‘s stock price jumped more than 20% Friday after the retail giant said it will let go of roughly 1,750 employees, or 10% of its global workforce, to support company-wide cost reductions.
The announcement marks Wayfair’s second round of job cuts in less than six months since the retailer let go of about 5% of its workforce in August. Executives expect the two rounds of layoffs will save $750 million a year, according to a press release.
Wayfair has already begun layoffs in Europe, and employees in North America will receive notice Friday about their employment status, Wayfair co-founder and Chief Executive Officer Niraj Shah wrote to staff in a company-wide email on Friday morning. The retailer will offer employees severance based on each individual’s circumstances, such as their country, tenure and level, Shah wrote.
The company said it expects to incur between $68 million and $78 million in costs, mostly related to employee severance and benefits, primarily within the first quarter of 2023.
Retail giants like Wayfair have been forced to reconcile with the reverse in their pandemic-era gains as consumers shift their spending priorities away from categories like home furnishings. The online furniture retailer, which was one of the pandemic’s winners as consumers spent more on home decoration and office furniture, has since struggled with supply chain issues that resulted in order delays and frustrated customers.
Wayfair reported a revenue decrease of 9% year over year and a $286 million loss in the third quarter of 2022. Sharp declines in recent quarters come after the Massachusetts-based retail giant saw a 55% jump in its revenue in 2020 to $14.1 billion.
“Unfortunately, along the way, we over complicated things, lost sight of some of our fundamentals and simply grew too big,” Shah said in the email to staff. “On an operating basis, we can see and feel that we’re not as agile as we used to be or need to be.”
Shah wrote that the company’s operating expenses relative to its revenue grew to 17% in the past year after sitting at about 10% to 11% for most of the company’s 20-year history. In addition to layoffs, he added the retailer has slimmed costs in advertising, insurance policies, janitorial services and software licenses.
The company now expects to return to adjusted EBITDA profitability earlier in 2023 as a result of these cost-cutting efforts, according to the press release.
“The changes today are largely about reducing management layers, right-sizing in certain places, and reorganizing to be more efficient,” Shah said.