Retail chain Bed Bath & Beyond and social media company Snap both announced major layoffs on Wednesday as high inflation and a sluggish economy hit big US companies.
Bed Bath & Beyond, which has become the latest meme stock darling for small retailers on Reddit, announced plans to close 150 of its roughly 900 stores and lay off 20 percent of its corporate and supply chain employees.
The big-box chain – once considered a so-called “category killer” for home and bath products – faltered when CEO Mark Tritton was fired in June after first-quarter sales plummeted 25 percent.
The company hired Sue Gove, an independent chief executive officer, to temporarily replace him.
On Wednesday, Gove said the retailer “continues to see significant positive momentum” and intends to build on its “deep heritage as a retailer”.
“While there is still much work to be done, our roadmap is clear and we are confident that the significant changes we announced today will have a positive impact on our performance,” she said on a conference call.
Bed Bath & Beyond announced plans to close 150 of its roughly 900 stores and lay off 20 percent of the company’s and supply chain employees
Bed Bath & Beyond shares fell sharply on Wednesday following the news
The retailer also announced a plan to raise money by issuing new shares and said it had secured $500 million in new funding – but investors were bleak about the strategic plan and shares fell by to in morning trading to 25 percent.
Traders on the WallStreetBets Reddit forum who have been cheering the stock for the past few weeks have reacted with a mixture of stoicism and despair.
“I just wanted to make money without effort. why do i have to suffer so much why?’ wrote a user in the forum.
Sue Gove took over as interim CEO of Bed Bath & Beyond earlier this year
In Wednesday’s update, Bed Bath & Beyond also forecast a sharper-than-expected 26 percent slump in same-store sales for the second quarter and said it would keep its buybuy baby business, which it had put up for sale.
Efforts to sell Buybuy Baby were encouraged by GameStop chairman Ryan Cohen, who was the company’s biggest investor until this month when he sold his 9.8 percent stake and shares plummeted.
Bed Bath & Beyond has revamped its wares in recent years to focus on private label products, including its Our Table brand cookware.
The chain is now abandoning that strategy, axing three of its own brands and reprioritizing national brands, with labels like Calphalon, Ugg, Dyson and Cuisinart underpinning that strategy, executives said on a conference call.
Executives said Bed Bath & Beyond will be cutting about 20 percent of its corporate and supply chain workforce and eliminating its chief operating officer and chief stores officer positions. The company employs a total of around 32,000 people.
Meanwhile, Snap CEO Evan Spiegel told employees in a memo Wednesday that ad sales weren’t keeping up with earlier forecasts and announced plans to restructure and cut about 20 percent of the company’s 5,600 employees.
Snap CEO Evan Spiegel told employees in a memo Wednesday that ad sales weren’t keeping up with forecasts and announced plans to cut staff by about 20 percent
‘In view of our currently lower sales growth, it has unfortunately become clear that we have to reduce our cost structure in order to avoid significant long-term losses,’ wrote Spiegel.
Snap will scrap ambitious projects including mobile games and novelties like a flying drone camera, helping the company save an estimated $500 million annually in costs, the company said.
Investors approved of the move, with Snap’s shares up as much as 15 percent in morning trade.
Spiegel said Snap is restructuring its business to focus on community growth, revenue growth and augmented reality.
Anything that doesn’t contribute to these three areas “will be discontinued or receive significantly reduced investments,” Spiegel said.
Last fall, Snap said its ad sales were hurt by a privacy crackdown being rolled out on Apple’s iPhones, raising concerns among investors about the app’s growth potential.
Most social media platforms rely heavily on advertising revenue, one reason Facebook has been an outspoken critic of Apple’s recent changes in privacy controls.
Snap’s shares rose on Wednesday as investors signaled approval of the cost cuts
Since Snap posted its first-ever profitable quarter in the last quarter of 2021, there has been little good news from the company.
On May 24, Snap shares lost nearly half their value, falling 43 percent after the company said in an SEC filing that the “macroeconomic environment had deteriorated further and faster than expected” and that it was hurting its own sales – and will not achieve profit targets in the period.
Shares plunged another 39 percent on July 22, a day after Snap released quarterly earnings that fell short of forecasts.
Snap’s workforce has grown to more than 5,600 employees in recent years, and the company said even after laying off more than 1,000 employees, its workforce will be larger than it was a year ago.
Snapchat is a video messaging platform that automatically deletes posts after recipients view them.
Like most other social media companies, Snap thrived during the pandemic as workers and students spent extended hours online at home. Snap shares peaked in late September 2021 at more than $83 per share.
Snap shares are up about 10 percent to $11 a share in midday trading on Wednesday after the layoffs were reported.