By Sam Boughedda
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)."