Why Are E-Commerce Company Wayfair Shares Surging Today?

Wayfair Inc W shares are trading higher by over 15% after the company disclosed workforce reduction as a part of right-sizing its cost structure.

The company disclosed a job cut of around 1,650 employees, representing about 13% of its global workforce and about 19% of its corporate team, both as of December 31, 2023. 

As a result of the job cuts, Wayfair expects to incur costs of around $70 million-$80 million, primarily of employee severance and benefit costs, most of which are expected to be incurred in the first quarter of 2024. 

The move is projected to deliver annualized cost savings of over $280 million, resulting in strong growth in Adjusted EBITDA in 2024 on both a dollar and margin basis.

The total cost savings comprise annualized cash compensation savings of around $150 million, annualized equity-based compensation relief related to employees of about $80 million, and annualized savings related to a reduction in capitalized technology labor of about $50 million.

Shah, CEO, co-founder, and co-chairman said, “Although persistent category weakness makes revenue growth challenging, we remain encouraged by the share gains we continue to see. 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.” 

“Although persistent category weakness makes revenue growth challenging, we remain encouraged by the share gains we continue to see,” commented Shah.

Wayfair will release the fourth quarter FY23 results in February 2024. 

In Q3 FY23, the company reported a sales increase of 3.7% Y/Y to $2.94 billion, missing the consensus of $2.98 billion, and adjusted EPS of $(0.13) beat the analyst consensus of $(0.48). 

As of Q3, the company held over $1.28 billion in cash and equivalents. 

Also Read: Wayfair CEO’s Year-End Memo To Staff: Long Hours And Work-Life Blend ‘Nothing To Shy Away From’

Price Action: W shares are up 15% at $58.54 premarket on the last check Friday.