Wayfair Inc. opened a Jacksonville distribution center in 2020 as part of a growth phase for the Boston-based online home furnishings retailer.
However, CEO Niraj Shah now says the company overdid it, and Wayfair has been retrenching operations.
Wayfair announced Jan. 19 it will reduce employment by about 1,650, or 13% of its global workforce.
This follows a layoff of about 1,750 employees announced in January 2023 and, according to The Associated Press, cuts of 870 jobs in August 2022 and 550 in 2020.
Wayfair announced plans in December 2018 to open its Jacksonville facility and create 250 jobs, and the center opened in July 2020.
A Wayfair spokeswoman said by email Jan. 22 that the company is not sharing details on specific locations but that the cuts affect mainly corporate roles.
“I think the reality is that we went overboard in hiring during a strong economic period and veered away from our core principles, and while we have come quite far back to them, we are not quite there,” Shah said in a message to employees about the latest layoffs.
“From 2017-2019 we opened up hiring significantly, going after many things that looked like good opportunities. As a result, by late 2019, we were suffering from lack of focus,” he said.
Wayfair changed direction in early 2020 and was intending to cut staff.
“Then, Covid hit us square on. Covid caused a dramatic surge in our business, and suddenly the newly leaned down team felt like a disadvantage,” Shah said.
Sales jumped from $6.8 billion in 2018 to $14.1 billion in 2020 as consumers turned to online shopping during the pandemic.
“By mid 2022 it was clear we were in a bust period. It was also clear that we had gone overboard with corporate hiring during Covid,” Shah said in the message.
Sales fell to $12.2 billion in 2022, still higher than its pre-coronavirus level.
Wayfair reported sales of $8.9 billion in the first nine months of 2023, down from $9.1 million in the year-earlier period.
The company had a net loss of $564 million in the first nine months of the year, compared with a $980 million loss the previous year.
“Although we’ve taken important steps to get ourselves optimized to win and fit for the future, the reality is they have not gotten us to where we need to be, which is to have a clean organizational model that provides a healthy foundation to grow from,” Shah said.
Morgan Stanley analyst Simeon Gutman said in a research note that he doesn’t expect more layoffs.
“In our view, this announcement could be the last significant cut to Wayfair’s cost structure, which has totaled about 3,400 in cumulative headcount reductions since the start of ‘23,” he said.
Wayfair’s stock jumped as much as $10.35 to $61.25 in the two trading days after the announcement.
Gutman maintained an “overweight” rating on Wayfar’s stock with an $80 price target.
“It is important Wayfair demonstrates strong profitability as it looks to fund business needs,” he said.
“As a result, maintaining consistent execution is even more critical, and this is another part of the investment story we will continue to monitor.”