Why Is Online Marketplace For Handmade Items Etsy Stock Falling Today?

Etsy Inc ETSY is laying off roughly 11% of its marketplace workforce as the e-commerce site grapples with a slowdown in consumer spending and increased competition from competitors like Shein and Temu. The cuts will affect roughly 225 employees.

Etsy is an e-commerce company focused on handmade or vintage items and craft supplies.

Following the restructuring plan, the headcount for the core Etsy marketplace team is estimated to be approximately 1,770 people, similar to the headcount level early in 2022.

Etsy expects to incur approximately $25 million to $30 million in charges, primarily in the fourth quarter of 2023.

The restructuring is expected to be complete by the end of Q1 of 2024. 

Etsy expects gross merchandise sales to decline between 1% and 2% during Q4 FY23 from the year-ago quarter and revenue to increase between 2% and 3%. 

The company expects an adjusted EBITDA margin of 27%-28%, up from previous guidance of 26%-27%. 

Etsy CEO Josh Silverman noted in a letter to employees that Etsy's marketplace has more than doubled since 2019 but said today's realities call for adjustments.

"We are operating in a very challenging macro and competitive environment, and [gross merchandise sales] has remained essentially flat since 2021," the letter reads. "This means we are not bringing our sellers more sales, which is the single most important thing we can do for them. At the same time, employee expenses have grown, even as we have introduced significant cost-cutting measures and adjusted or paused hiring plans. This is ultimately not a sustainable trajectory and we must change it."

Etsy announced the departure of Ryan Scott, Chief Marketing Officer, effective December 31, 2023, but he will continue in an advisory role, which may extend through June 30, 2024.

Raina Moskowitz, formerly Chief Operating Officer, will assume the Chief Operating and Marketing Officer title.

Price Action: ETSY shares are down 5.19% at $81.36 on the last check Wednesday.

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