Shares of online home goods retailer Wayfair (NYSE:W) gained more than 7% in Friday’s pre-market trading session after it announced plans to cut down costs. The company intends to lay off about 1,750 employees, or 10% of its workforce.
The latest round of job cuts is part of the company’s cost control plans initiated in August 2022. Wayfair aims to achieve more than $1.4 billion in annual cost savings. Furthermore, it expects its cost efficiency plans to accelerate its goal to achieve break-even adjusted EBITDA to “earlier in 2023.”
Wayfair anticipates incurring layoff-related expenses between $68 million and $78 million. Most of these costs will likely reflect in the first quarter of 2023.
The online furniture seller had witnessed a sharp rise in sales during the pandemic as demand for electronics, furnishings, and other decor items increased considerably. At the time, Wayfair hired several workers to build customer service teams and bolster warehouse operations.
However, rising interest rates and high inflation have impacted consumers’ spending power and resulted in lower demand for discretionary products.
The company delivered a 9% decline in sales in the third quarter of 2022 and a 13% drop in the first nine months of 2022. Wayfair is expected to release its full-year 2022 results on February 23.
Is Wayfair a Buy Now?
The consensus among analysts is a Hold based on six Buys, 10 Holds, and three Sells. The average Wayfair price target of $49.13 implies 26.3% upside potential to current levels. Shares have already gained 18.8% so far this year.
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