Wayfair (NYSE:W) is preparing to lay off 1,750 workers, or about 10% of the workforce, as the online furniture retailer struggles with slowing sales. Shares fell 5% on Jan. 19 but rebounded by 8% since on the news. W stock opened Jan. 20 at $42.05 per share with a market capitalization of $4.6 billion on expected 2022 revenue of more than $12 billion.
Wayfair is expected to report its Christmas quarter on Feb. 23. Analysts are expecting a loss. The company’s only full-year profit came in 2020. It lost more than $9 per share through the first three quarters of 2022.
Trim to Fit
Wayfair is just the latest tech-oriented company to announce layoffs. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is laying off 12,000 and Microsoft (NASDAQ:MSFT) is laying off 10,000. Meanwhile, Amazon (NASDAQ:AMZN) is laying off 18,000 and Salesforce (NYSE:CRM) is laying off 8,000.
The difference is this is the second round of layoffs for Boston-based Wayfair and the company remains unprofitable. Its stock peaked in early 2021 when it closed at more than $340 per share. It’s down 86% over the last two years.
Wayfair hopes the layoffs and economic recovery will combine to deliver a profit in the second half of 2023. CEO Niraj Shah told employees in an e-mail that the company grew too big.
Tech stocks are often valued at a high multiple to sales, but Wayfair is no longer seen as a tech company. Retailers are valued at a discount to sales based on their thin margins. Wayfair is now valued at about one-third of its expected revenue. Macy’s (NYSE:M) is presently selling for about one-fourth its annual revenue.
What Happens After Wayfair Layoffs?
If Wayfair’s cuts lead to a profit, it should be a profitable hold for investors. But analysts are increasingly skeptical. Of the 19 still following the stock at Tipranks, only six are telling clients to buy it and three are saying sell.
On the date of publication, Dana Blankenhorn held positions in AMZN, GOOGL, MSFT and CRM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
