Switch Fix Inc (NASDAQ: SFIX) dropped 20% after announcing 330 job cuts as styling and personal shopping services grapple with widening losses and sales slowdown. The jobs the company is cutting account for 15% of the company’s workforce in a move to cut expenses in the wake of waning customer demand for certain products and increasing inflation.
Job cuts to save Switch Fix $40 million to $60 million in FY2023
The company announced the job cuts as it released its financial results for the quarter ending April 30, 2022. With the layoffs, the company anticipates saving around $40 million of $60 million in FY2023. Also, it expects to incur restructuring and one-time charges of around $15 million to $20 million, expected to be recognized in Q4.
In a memo to Stich Fix staff, CEO Elizabeth Spaulding said that the cuts would affect the nontechnology corporate positions and styling executive roles. The company started notifying the affected employees on Thursday. Spaulding wrote:
We are in the midst of a transformation and we know not every day or every moment will be easy. There will be tough choices along the way, and this is one of those.
The company also issued a dismal projection for its Q4, predicting sales to range from $485 million to $495 million, a reduction of up to 15% from prior-year levels.
The layoffs come as the digital styling service grapples with rising costs across the board, from supply chains to advertising to staffing, as well as a struggle to enroll new users.
We’ve taken a renewed look at our business and what is required to build our future. While this was an incredibly difficult decision, it was one needed to make to position ourselves for profitable growth.
Q3 2022 revenue dropped 8% YoY.
In the third quarter, the company reported revenue of $492.9 million which is an 8% drop from last year. Net loss was $78 million or $0.72 per share relative to $19.8 million or $0.18 per share a year ago.
Stich Fix’s business is mainly online, which was seen as a bright spot during the pandemic as more consumers shifted to online shopping. However, with the easing of COVID-19 restrictions, people have returned to shopping in stores.