A Strategic Move in Response to Market Realities
CEO Josh Silverman addressed employees in a heartfelt letter, emphasizing that despite the marketplace’s impressive growth, current circumstances necessitate swift action. Gross merchandise sales have remained essentially flat since 2021, while employee expenses have continued to rise. Despite introducing cost-cutting measures and adjusting hiring plans, Etsy has seen limited progress in revenue growth.
Reorganization Plans and Financial Expectations
In response to these challenges, Etsy plans to reorganize its internal structure. The company aims to reignite growth, bolster sales for its millions of sellers worldwide, and deliver value to stakeholders. As a result of the restructuring, the responsibilities of Chief Marketing Officer Ryan Scott will be absorbed by Chief Operating Officer Raina Moskowitz. Additionally, Chief Human Resources Officer Kimaria Seymour will depart, with Toni Thompson assuming the role.
Etsy expects the layoffs to generate cost savings and operational efficiencies, particularly relating to salary expenses and benefits. The company estimates expenses of $25 million to $30 million for severance payments and related costs. Despite the difficult timing of the layoffs during the holiday season, impacted employees will receive pay through at least January 2. Severance packages will include 16 weeks of base pay plus an additional week for each year of service.
Charting the Path Forward
To navigate the challenging macro environment and combat flat growth, Etsy has revised its financial expectations. The company predicts a decline in gross merchandise sales of 1% to 2% compared to the year-ago quarter. However, it anticipates revenue to increase by 2% to 3%. Furthermore, Etsy now expects an adjusted EBITDA margin of 27% to 28%, surpassing previous guidance.
Etsy remains committed to its mission of supporting sellers and creating value for all stakeholders. Silverman expressed his dedication to driving sales for the platform’s millions of sellers worldwide. While regrettable, the layoffs are a necessary step toward refocusing the company’s efforts and ensuring long-term success. The restructuring aims to yield substantial benefits, positioning Etsy for a more sustainable future.