Wayfair Inc. (NYSE: W) shares are experiencing a notable surge in the pre-market trading session, marking a 15.03% increase to reach $58.55. The stock exhibited relative stability in the preceding session, closing at $50.90. This upward momentum in Wayfair’s stock value is attributed to a strategic initiative unveiled today.
Wayfair (W) has disclosed specifics regarding its endeavor to optimize its cost structure, building upon a series of actions initiated in August 2022. Following a comprehensive evaluation of team size and structure throughout the organization, the company has announced a workforce reduction affecting around 1,650 employees.
This reduction represents approximately 13% of the global workforce and about 19% of the corporate team, as of December 31, 2023. Anticipated to yield annualized cost savings surpassing $280 million, this strategic move aligns with the company’s commitment to fundamental principles of resource allocation, emphasizing efficiency in spans and layers, and prioritizing key objectives.
The outlined changes signal a reiteration of Wayfair’s commitment to its core values, prompting adjustments in team sizes across the organization. The company also plans to modify seniority in specific roles, with intentions to rebuild over the course of the year. Beyond fortifying Wayfair’s Adjusted EBITDA roadmap, these measures aim to maximize Free Cash Flow, exercising tight control over and ultimately reducing total share count.
The fiscal impact of these actions encompasses approximately $150 million in annualized cash compensation savings, with $125 million expected to reflect in the Selling, Operations, Technology, General & Administrative (SOTG&A) expense line. The remainder will be allocated to the Customer Service & Merchant Fees expense line. These figures, factoring in the company’s plans to rebuild a portion of the workforce in 2024, represent net savings.
Furthermore, the company anticipates an annualized relief of approximately $80 million in equity-based compensation, associated with the affected employees. An additional $50 million in annualized savings is projected, attributed to a reduction in capitalized technology labor, accounted for as part of the capital expenditures line item.
In light of the announced workforce reduction, Wayfair foresees incurring costs ranging between approximately $70 million and $80 million. These costs primarily encompass employee severance and benefit expenses, with the majority expected to be incurred in the first quarter of 2024. It’s important to note that the provided estimates exclude any non-cash charges associated with equity-based compensation.
