Wayfair is cutting nearly 900 jobs, or about 5% of the once-hot online retailer’s global workforce, as it struggles to regain its financial footing in a post-pandemic future.
The company said in a regulatory filing that the cuts will help it “manage operating costs and refocus investment priorities.” Shares were down 14% in early trading on Friday.
CEO Niraj Shah wrote in a letter to staff that the layoffs were a “difficult decision” due to Covid-19.
“We’ve seen the tailwinds of the pandemic accelerate the adoption of e-commerce shopping, and I’ve personally been working hard to hire a strong team to support this growth,” Shah wrote. “This year, that growth hasn’t happened as we expected. Our team is too big for the environment we’re in now, and unfortunately we have to adapt.”
Wayfair thrived at the start of the pandemic, when demand for luxury furniture and other home decor improvements was so hot that it disrupted global supply chains and caused long delivery delays.
But fast forward two years and the picture looks very different now.
Inflation has hit lower- and middle-income shoppers, who have scaled back their discretionary purchases and focused on paying for necessities like groceries, gas and rent. Wealthier customers shifted their spending from furniture and other goods to travel and services. Mortgage rates have risen significantly, reducing the demand for new homes.
These macro trends have hit consumer spending hard, and along with retailers like Target, Wayfair ( W ) has struggled.
Sales in the second quarter fell by 15% year-on-year. The brand also lost 24% of its active customers – a sign that the company is struggling to retain the customers it acquired at the start of the pandemic. overall, Wayfair reported a net loss of $378 million during the quarter.
Wayfair shares have lost roughly 70% of their value since the start of the year.
The layoffs will cost Wayfair $30 million to $40 million in severance and employee benefits, a charge the company expects to take in the third quarter.