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Wayfair Updates On Restructuring Plans

Wayfair website June 2022
  • Restructuring and recent business trends provide accelerated path to profitability goals

Wayfair Inc. (NYSE:W), one of the world’s largest destinations for the home, today announced additional details related to right-sizing its cost structure as well as continued strong business performance since the Cyber Five period. Totaling more than $1.4 billion in annualized cost actions, the plan – initiated in August 2022 – is well underway and is expected to accelerate the company’s timeline for adjusted EBITDA breakeven to earlier in 2023 as the first step towards positive free cash flow.

As a part of this effort, Wayfair today announced a reduction of approximately 1,750 employees, representing 10% of its global workforce as of December 31, 2022. This includes approximately 1,200 or 18% of corporate employees. These changes reflect efforts to eliminate management layers and reorganize to be more agile. Inclusive of the August 2022 restructuring, the labor portion of the plan represents approximately $750 million in annualized cost savings, with the major steps necessary to realize these savings now complete.

“Although difficult, these are important decisions to get back to our 20-year roots as a focused, lean company premised on high ambitions and great execution,” said Niraj Shah, CEO, co-founder, and co-chairman, Wayfair. “The changes announced today strengthen our future without reducing our total addressable market, our strategic objectives, or our ability to deliver them over time. In hindsight, similar to our technology peers, we scaled our spend too quickly over the last few years. The good news for Wayfair is that we have operated in a highly productive and efficient way for the vast majority of our 20 year history, and we are now simply returning to that.”

Shah continued, “To our colleagues departing Wayfair, I want to thank you for your contributions to the company and for the impact you’ve had on the business. We’re deeply saddened that these changes will take us in different directions.”

Additionally, business momentum continues to strengthen. In December, year-over-year gross revenue trends experienced a further improvement compared to the month of November. “We are encouraged by our recent topline performance and in particular the momentum in orders,” commented Niraj Shah. “Our market share continues to improve as our core offering strengthens across key dimensions such as availability, speed, and price.”

Combined, the recent topline performance and additional cost savings are driving faster progress toward the company’s profitability objectives. The company now expects to reach its adjusted EBITDA breakeven commitment earlier in 2023 as the first step toward its goal of generating sustainable positive free cash flow. Wayfair will provide full results for the quarter and year ended December 31, 2022 on its February 2023 earnings call.

The following are additional details on the cost plan in progress:

  • Approximately $750 million of annualized labor reductions, including cash and stock based compensation, relative to Q2’22 levels
    • The majority of labor savings are reflected in the company’s Selling, Operations, Technology, General & Administrative (SOTG&A) expense line and are largely completed as of today
  • Approximately $500 million of annualized operational cost savings already underway, with full realization anticipated by late 2023
    • These reductions are reflected in the Cost of Goods Sold (COGS) expense line, and Wayfair may choose to reinvest a portion of these savings back into the customer value proposition
  • In excess of $150 million in identified annualized reductions relative to previously planned non-COGS, non-labor spend, including advertising, capital expenditures, and various G&A expenses

As a result of the workforce reduction, Wayfair expects to incur between approximately $68 million and $78 million of costs, consisting primarily of employee severance and benefit costs, most of which are expected to be incurred in the first quarter of 2023. The foregoing estimated amounts do not include any non-cash charges associated with stock-based compensation.

Source : Wayfair

Image : Wayfair website

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23 January 2023

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