Wayfair to Cut Workforce by 5%, Shares Plunge
2022.08.19 19:06
Budrigannews.com – Wayfair (NYSE:W) shares have plummeted more than 16% Friday after it said it is cutting its workforce by approximately 870 employees to manage operating expenses and realign investment priorities.
The reduction represents approximately 5% of Wayfair’s global workforce and around 10% of its corporate team, while it is also making “substantial reductions” in its third-party labor costs, the company said in a filing.
“As a result of this workforce reduction, we expect to incur between approximately $30 million and $40 million of cost as part of previously announced plans to manage Opex and realign investment priorities,” Wayfair said in the filing.
Following the news, a Needham analyst reiterated a Buy rating and $100 price target on Wayfair shares, stating that a 5% workforce reduction equals $100M to $110M in lower Opex, which should help drive adj EBITDA closer to breakeven in 2023.
“This is also higher than the 3% workforce reduction pre-pandemic. The company will incur $30M-$40M of severance and benefit costs mostly in 3Q22–which we expect to be one time items and backed out by the Street,” wrote the analyst.
“We don’t believe this move is a reaction to trends slowing further in August (as of 8/4 print, consolidated sales were running down 10%) but is rather part of the cost realignment already discussed on the 2Q22 call as the company strives towards profitability; September is the easiest compare of 3Q22 (LY International especially took a step down vs. 2Q21, down 23%, while U.S. declined 6% sequentially).”
