wayfel The company said on Friday it was exiting the German market and planned to lay off as many as 730 people, or about 3% of its global workforce, to focus on new growth drivers such as physical retail.
Finance chief Kate Gulliver told CNBC that about half of the affected employees would have the option to stay at Wayfair if they agreed to move to London, Boston or other locations where the company operates. . Affected positions include corporate positions as well as those on Wayfair’s customer service and warehouse teams, she said.
In a memo to employees shared with CNBC, founder and CEO Niraj Shah said Wayfair is spending too much time and money expanding its operations in Germany and the company’s funds would be better spent on other growth. plan.
“Expanding our market share in the German market and improving our unit economics has proven challenging due to factors such as weak macroeconomic conditions in Germany, low product maturity, current brand awareness, and limited scale,” Shah wrote. road.
“In our most recent assessment, we concluded that achieving market-leading growth in Germany remains a lengthy and expensive endeavor that increasingly lags behind the potential returns we see in other areas. To ensure We aligned our resources with the ability to achieve the greatest impact. We made the difficult but necessary decision to reallocate efforts to areas with strong long-term potential, and our current efforts are showing tremendous progress,” he wrote.
The stock rose about 5% in premarket trading Friday.
Gulliver said Wayfair has been operating in Germany for 15 years and the country accounts for a “low single-digit percentage” of Wayfair’s revenue, customers and orders. The restructuring is expected to cost $102 million to $111 million, including $40 million to $44 million in employee-related costs such as severance, benefits, relocation and transition costs, and approximately $62 million to $67 million related to facility closures. The non-cash charge Wayfair said in a securities filing.
The company expects to make these payments over the next 12 months, but expects payments to occur between the fourth quarter of 2024 and the first quarter of 2025 – a six-month period ending at the end of March.
Wayfair said in a securities filing that it expects to use the savings from the restructuring primarily to reinvest in other core initiatives, such as its physical retail initiatives and remaining international markets. Gulliver said the company’s guidance has not changed.
Friday’s layoffs are fourth Gulliver said Wayfair has been implementing this initiative since the summer of 2022, but the move is not about cost savings but about reallocating resources to initiatives that actually make money for the company.
“We didn’t do it because we said we need some cost-efficiency play, so we have to look for more cost, and we identified Germany,” Gulliver said. “We’re seeing better ROI plans, We’ve made further progress on that and we can continue to invest in that, so it’s an investment priority and (we’re) looking at regions like the UK, Canada, where we see very exciting outcome opportunities. .
These initiatives include Wayfair moves into physical retailThe company officially opened its first eponymous store outside Chicago in May. Since the store opened, the company has enjoyed what Gulliver calls the “halo effect,” an increase in online sales from customers who live near the store. Gulliver said the company plans to open one or two more stores in the U.S. “short term,” and hopes to expand those doors to international markets such as Canada and the United Kingdom.
“Obviously, we want to do this in the United States first,” Gulliver said. “But over time, we’re excited about its potential.”
Still, brick-and-mortar retail can be a huge capital expenditure. Wayfair has not achieved an annual net profit since 2020.
Wayfair’s decision comes as the company looks to boost revenue growth in a sluggish housing market that has depressed demand for home furnishings. Sales fell 2% to $2.9 billion in the three months ended Sept. 30.
“Making decisions that affect humans is always difficult,” she said. “We care deeply about the team there and we’re very grateful for their work, but we do believe this is the right next step for the business and allows us to focus on these higher ROI priorities.”
