Niraj Shah, CEO, co-founder and co-chairman of Wayfair, said in a memo sent to staff on Friday (Aug. 19) that he had pushed for expanding the company’s team as customer growth and sales accelerated during the pandemic. The growth was expected to continue but never materialized, in part due to record-high inflation, according to multiple media reports.
Trading on the New York Stock Exchange under the ticker W, Wayfair shares tumbled about 8% in premarket trading when news of the layoffs first started spreading. Shares were down about 12% at 11 a.m. EDT.
The layoffs are expected to cost the eCommerce firm between $30 and $40 million in severance, which is being offered based on geography, tenure and job level, the Boston Globe reported. The company said it expects to take the charge in the third quarter. Wayfair cut 550 workers worldwide in February 2021.
Wayfair’s market value dropped 80% to less than $7 billion from about $35 billion last year, the Globe reported.
See also: Wayfair Customer Numbers, Deliveries Fall Sharply
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The company’s second-quarter earnings showed a 24.1% decline in customers year over year, with deliveries down 28.2%, PYMNTS reported on Aug. 4. Sales declined 15% year-over-year for the second quarter. The number of active customers dropped to 24 million from 31 million a year ago.
The dismal report follows Wayfair’s appointment of Kate Gulliver as chief financial officer (CFO) and chief administrative officer (CAO) in May.
Aside from a drop-off in sales and customers, Wayfair also said it was hurt by runaway supply chain costs and a decrease in the demand for furniture that is affecting the whole industry.
Read more: Floundering Furniture Segment Faces New Threats From Competitors, Consumers
Ikea, for example, is turning many warehouse stores into fulfillment centers to accommodate the demand for eCommerce shopping. Williams-Sonoma, which also owns the Pottery Barn and West Elm brands, is also increasing its omnichannel efforts, PYMNTS reported in May.
Shah said in the memo to employees that Wayfair management is committed to steering the company “in a financially responsible manner,” the Boston Globe reported.
“We are actively navigating Wayfair towards a level of profitability that will allow us to control our own destiny, while still investing aggressively in the future,” Shah said. “The macro environment doesn’t change our belief in the size of the opportunity, and we are moving purposely to seize that opportunity.”
