Etsy stock falls after company lays off 11% of its staff, citing ‘very challenging’ environment
- Etsy is laying off 11% of its workforce, about 225 employees.
- Etsy CEO Josh Silverman noted in a letter to employees that Etsy's marketplace has more than doubled in size since 2019 but said today's macroenvironment and competitive realities call for sweeping changes.
- The marketplace giant also updated its fourth-quarter guidance and is now expecting its adjusted EBITDA margin to be between 27% and 28%, up from previous guidance of 26% to 27%.
Etsy is laying off 11% of its workforce at the height of the holiday season as the e-commerce giant looks to restructure its business and streamline costs against a "very challenging" macro and competitive environment, the company announced Wednesday.
Approximately 225 employees will be cut from Etsy's workforce, which will bring the headcount for the core Etsy marketplace to about 1,770 people, similar to the company's headcount in early 2022 and above 2020 levels.
Etsy CEO Josh Silverman noted in a letter to employees that Etsy's marketplace — known for selling handmade items and connecting buyers with local artisans across the globe — has more than doubled in size since 2019 but said today's realities call for sweeping changes.
"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."
The news comes alongside updated fourth-quarter guidance for Etsy. The company now expects gross merchandise sales to decline between 1% and 2% during the period from the year-ago quarter and revenue to increase between 2% and 3%. It's expecting adjusted EBITDA margin of between 27% and 28%, up from previous guidance of 26% to 27%.
Shares of Etsy closed 2% lower following the announcement, after falling as much as 7% earlier in the day.
"Etsy is intensely focused on reigniting growth, driving sales for our nearly 7 million sellers around the world, and delivering value to all of our stakeholders. Today, we announced that we are reorganizing our internal structure so that we can double down on these efforts, which unfortunately means saying goodbye to approximately 225 of our colleagues," Silverman said in a statement to CNBC.
The layoffs come two days after toymaker Hasbro announced it was cutting 1,100 employees as it grapples with soft sales that have continued into the crucial holiday shopping season. Hasbro had about 6,300 employees as of earlier this year, according to a company fact sheet.
Etsy's layoffs will cost between $25 million and $30 million, the bulk of which will be used for severance payments, employee benefits and other related costs, the company said in a securities filing. Over time, the restructuring is expected to "deliver meaningful operational efficiencies and cost savings and/or cost avoidance," especially when it comes to salary costs and benefits.
The restructuring is expected to be complete by the end of the first quarter of 2024.
As part of the restructuring, Etsy's chief marketing officer Ryan Scott will be leaving the company and his position will be consolidated under the chief operating officer role, which is currently held by Raina Moskowitz, a former American Express executive.
Etsy's chief human resources officer Kimaria Seymour will also be leaving the company and will be replaced by Toni Thompson, the company's current vice president of global people and talent strategy.
Considering the layoffs come in the middle of the holiday season when many employees are shopping for gifts for their loved ones, Etsy said it would pay affected staff through at least Jan. 2, even though the last working day for most staff will be Wednesday.
They'll receive severance of 16 weeks of base pay, plus one week for each full year of service, along with other benefits such as extended COBRA health insurance benefits and the ability to keep their company laptop.
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