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Wayfair Announces Workforce Reduction of 1,650

Furniture World News Desk on 1/19/2024


 

Wayfair Inc., recently announced details related to right-sizing its cost structure, following the series of actions originally initiated in August 2022. After a comprehensive, organization-wide analysis of the appropriate team size and structure, the company announced a workforce reduction involving approximately 1,650 employees, representing approximately 13% of its global workforce and approximately 19% of its corporate team, in each case as of December 31, 2023. This action is expected to deliver annualized cost savings of more than $280 million.

"Earlier today I sent a note to all Wayfair employees detailing today's action and the rationale behind it, which is available for everyone to read on our company site. The changes announced today reflect a return to our core principles on resource allocation, such as getting fit on spans and layers as well as focusing on our highest priorities. As a result, we're reducing team sizes across the organization, as well as reducing seniority in certain roles that we plan to rebuild with modified leveling over the course of this year," commented Shah, CEO, co-founder, and co-chairman, Wayfair. "While today's actions will bolster our Adjusted EBITDA roadmap, I am increasingly focused on generating Adjusted EBITDA in excess of equity-based compensation as well as capital expenditures, and intend to drive meaningful improvements here quickly. We believe that what matters is maximizing our Free Cash Flow while simultaneously tightly controlling and ultimately reducing total share count, and are treating this as our north star."

Shah continued, "To our colleagues departing Wayfair, I want to thank you for your incredible contributions to Wayfair and to our customers. You have so much to be proud of. I truly regret the impact this will have on you."

The incremental cost savings provide the company further confidence in the path to deliver substantial growth in Adjusted EBITDA in 2024 on both a dollars and margin basis. "Although persistent category weakness makes revenue growth challenging, we remain encouraged by the share gains we continue to see," commented Shah. "Based on today's announcement, in a hypothetical flat revenue environment - inclusive of the rebuilt roles - we would now expect to deliver over $600 million of Adjusted EBITDA in 2024." Wayfair will provide full results for the quarter and year ended December 31, 2023 on its February 2024 earnings call.

The following are additional details on the workforce realignment plan:

  • Approximately $150 million of annualized cash compensation savings, roughly $125 million of which will be reflected in the company's Selling, Operations, Technology, General & Administrative (SOTG&A) expense line with the remainder from the Customer Service & Merchant Fees expense line. These are net savings figures incorporating the company's plans to rebuild a portion of the headcount over 2024.
  • Approximately $80 million of annualized equity-based compensation relief associated with the impacted employees.
  • Approximately $50 million of annualized savings related to a reduction in capitalized technology labor, which is accounted for as a component of the company's capital expenditures line item.

As a result of the workforce reduction, Wayfair expects to incur between approximately $70 million and $80 million of costs, consisting primarily of employee severance and benefit costs, most of which are expected to be incurred in the first quarter of 2024. The foregoing estimated amounts do not include any non-cash charges associated with equity-based compensation.

About Wayfair:  Wayfair is the destination for all things home: helping everyone, anywhere create their feeling of home. From expert customer service, to the development of tools that make the shopping process easier, to carrying one of the widest and deepest selections of items for every space, style, and budget, Wayfair gives everyone the power to create spaces that are just right for them.

The Wayfair family of sites includes:

  • Wayfair: Everything home — for a space that's all you.
  • Joss & Main: The ultimate style edit for home.
  • AllModern: All of modern, made simple.
  • Birch Lane: A fresh take on the classics.
  • Perigold: An undiscovered world of luxury design.
  • Wayfair Professional: Just right for Pros.

Wayfair generated $12.0 billion in net revenue for the twelve months ended September 30, 2023 and is headquartered in Boston, Massachusetts with global operations.