Shares of Etsy (NASDAQ:ETSY) stock are trading lower after the e-commerce company announced that it would lay off 11% of its workforce, or about 225 employees, as part of an internal reorganization plan.
Following the layoffs, Etsy will still employ around 1,770 employees, similar to the number of employees it employed in 2022 and still greater than the headcount in 2020.
“We are operating in a very challenging macro and competitive environment, and [gross merchandise sales] has remained essentially flat since 2021,” said CEO Josh Silverman in a letter to employees. “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.”
ETSY Stock: Etsy Layoffs 11% of Workforce
Additionally, Etsy also updated its fourth-quarter guidance. Now, gross merchandise sales is expected to fall between 1% and 2% year-over-year (YOY) while revenue is expected to rise between 2% and 3%. Furthermore, adjusted EBITDA margin is expected to be up between 27% and 28%, which is up from the prior estimate of between 26% and 27%.
The Etsy layoffs are expected to set back Etsy between $25 million and $30 million, most of which is attributed to severance pay and employee benefit costs, such as healthcare, bonuses and unused paid time off (PTO).
Meanwhile, the company also announced changes to its executive structure. Nick Daniel will take responsibility of the payment and fulfillment functions while Chief Marketing Officer Ryan Scott will leave the company. Raina Moskovitz will take on additional responsibility as Chief Operating and Marketing Officer.
Furthermore, Chief Human Resources Officer Kim Seymour will step down from her role with Toni Thompson as her replacement. These adjustments will be effective as of Jan. 1, 2024. In the letter, Silverman stated that Etsy would provide another reorganization update tomorrow.
These changes have made it clear that Etsy is dealing with issues in its business model. The timing is also unfortunate, as shoppers are in the midst of the holiday shopping season.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
