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Wayfair lays off 5% of its global workforce – cutting nearly 900 jobs

Online furniture retailer Wayfair said on Friday it would cut about 870 jobs, or 5 percent of its global workforce, as it seeks to cut costs in the face of slumping sales.

‘Our team is too large for the environment we are now in, and unfortunately we need to adjust,’ said CEO and co-founder Niraj Shah in a memo to staff.

‘We were seeing the tailwinds of the pandemic accelerate the adoption of ecommerce shopping, and I personally pushed hard to hire a strong team to support that growth. This year, that growth has not materialized as we had anticipated,’ he added. 

Retailers have been battered by soaring inflation in recent months, as sky-high food and gas prices leave consumers with little left over to spend on non-essential goods, also known as discretionary spending.  

In recent earnings reports, retailers including Restoration Hardware and Target noted weaker sales of furniture as U.S. consumers spend less on big-ticket items.

News of the job cuts sent Wayfair’s share price down sharply. The stock tumbled 29 percent to close at $57.01. 

Online furniture retailer Wayfair said on Friday it would cut about 870 jobs, or 5 percent of its global workforce, as it seeks to cut costs in the face of slumping sales

News of the job cuts sent Wayfair's share price down sharply. The stock tumbled 29 percent to close at $57.01

News of the job cuts sent Wayfair’s share price down sharply. The stock tumbled 29 percent to close at $57.01

Discretionary spending is quickly decelerating, according to Oliver Wintermantel, an equity analyst at Evercore ISI.

New Commerce Department data released Wednesday morning showed that US retail spending was flat in July from the prior month, as higher prices put a squeeze on consumers. 

‘Americans have had to trade down or delay purchases as inflation continues to squeeze household budgets,’ Morning Consult’s retail and e-commerce analyst Claire Tassin told DailyMail.com earlier this week. 

‘Today’s retail sales number is a direct reflection of inflation’s impact on consumer spending, and that’s apparent in today’s 0.0 percent month-over-month change in retail sales,’ said Tassin. 

Wayfair said the costs of the layoffs would be in the range of $30 million to $40 million, mainly due to employee severance and benefit expenses. 

The bulk of these costs are expected in the third quarter, it said.

Wayfair CEO Niraj Shah (right) who co-founded the company earned $227,271 last year

Wayfair CEO Niraj Shah (right) who co-founded the company earned $227,271 last year

Inflation has forced Americans to delay some non-essential purchases as they spend more each month on essentials such as groceries as gas

Inflation has forced Americans to delay some non-essential purchases as they spend more each month on essentials such as groceries as gas

The company is headquartered in Boston, and about 400 of the layoffs will occur in Beantown. 

Earlier this month, Wayfair reported a larger-than-expected second-quarter loss, hurt by soaring supply chain expenses and declining demand for furniture from pandemic highs.

During COVID-19 lockdowns, sales of furniture and other household items soared as people hunkered down in their homes.

But shifting habits, coupled with inflation, have thrown demand for those goods into reverse, experts say.

‘I think the home furnishing markets even compared to pre-pandemic is still good, because we are spending a lot more time at home,’ said Wintermantel. ‘We’re continuing to update or upgrade home but it’s certainly down versus where we were in the last two years.’ 

On Wednesday, Target reported that its profits plunged nearly 90 percent last quarter after it was forced to slash prices to clear unwanted inventories of clothing, home goods and electronics.

In early June, Target warned that it was canceling orders from suppliers and aggressively cutting prices because of a pronounced spending shift by Americans as inflation cuts into spending on non-essential items.

Target reported on Wednesday that its profits plunged nearly 90 percent last quarter after it was forced to slash prices to clear unwanted inventories of non-essential items

Target reported on Wednesday that its profits plunged nearly 90 percent last quarter after it was forced to slash prices to clear unwanted inventories of non-essential items

The parent company of TJ Maxx, which also owns Marshalls and HomeGoods, slashed its annual earnings forecast on Wednesday

The parent company of TJ Maxx, which also owns Marshalls and HomeGoods, slashed its annual earnings forecast on Wednesday

US retailers have cut their profit forecasts in recent weeks as consumers squeezed by higher prices for essentials such as food and gas cut back on items like apparel and electronics.

The parent company of TJ Maxx, which also owns Marshalls and HomeGoods, slashed its annual earnings forecast on Wednesday after missing sales estimates for the last quarter.

Inflation is hitting low-income consumers especially hard, and discount clothing retailers such as Burlington Stores and Ross Stores have seen some of the biggest pullbacks in spending.

Walmart also slashed its yearly profit projection last month — but the nation’s biggest retailer relies more on sales of groceries and other essentials, and has seen an influx of higher-income shoppers seeking bargains on those items.

America’s consumers, whose spending accounts for nearly 70 percent of economic activity, have remained mostly resilient even with year-over-year inflation near a four-decade high, economic uncertainties rising and mortgage and other borrowing rates surging. 

The pace of US retail sales was unchanged last month from June, new data show

The pace of US retail sales was unchanged last month from June, new data show

Still, their overall spending has weakened, and it has shifted increasingly toward necessities like groceries and away from discretionary items like home goods, casual clothes and electronics.

In recent months, Americans have also been shifting their purchases away from physical goods and more toward services, like travel, hotel stays and plane fares.

Inflation continues to pose a severe hardship to families, with the consumer price index rising 8.5 percent in July from a year ago.

Though gasoline prices have fallen from their heights, food, rent, used cars and other necessities have become far more expensive, beyond whatever wage increases most workers have received.

Despite a still-robust job market, the U.S. economy shrank in the first half of 2022, raising fears of a potential recession. 

Growth has been weakening largely as a consequence of the Federal Reserve’s aggressive interest rate hikes, which are intended to cool the economy and tame high inflation.


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