Move will result in 1,650 layoffs, save company $280 million a year
BOSTON — Wayfair is reducing its global workforce by 13%, a move that will put about 1,650 of its employees out of work, including 19% of its corporate team as of Dec. 31, 2023.
The move is expected to save the company more than $280 million a year.
About $150 million of the savings will be in annualized cash compensation savings, some $125 million of which will occur in the company’s Selling, Operations, Technology, General & Administrative expenses. The remainder will be from its Customer Service & Merchant Fees expense line. The company said these are net savings figures that incorporate the company’s plans to rebuild a portion of its headcount this year.
The company also noted that $80 million of the savings will be annualized equity-based compensation relief associated with the impacted employees and another $50 million is related to a reduction in capitalized technology labor. This is part of the company’s capital expenditures.
The company said it expects to incur between $70 million and $80 million of costs, largely employee severance and benefit costs. Most of these are expected to be incurred in the first quarter of 2024. The company also noted that the estimates do not include any non-cash charges associated with equity-based compensation.
Niraj Shah, chief executive officer, co-founder and co-chairman, said he notified employees of the changes and the rationale behind them.
“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,” he said. “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. 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.”
He added that 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,” Shah said. “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.”
“To our colleagues departing Wayfair, I want to thank you for your incredible contributions to Wayfair and to our customers,” he added. “You have so much to be proud of. I truly regret the impact this will have on you.”