Shares of Wayfair (W) fell in early trade on Friday after the online home goods company said it will exit the German market after 15 years.
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The decision affects approximately 730 employees, with estimated restructuring charges between $102 million and $111 million. Following the announcement, W stock dipped more than 2% before paring losses.
German Market Proves Too Challenging for Wayfair
Germany had been the company’s original entry point for Europe, along with the UK. However, it seems lately that the success of the UK business has outpaced that of Germany.
“Scaling our market share and improving our unit economics in the German market has proven challenging,” said CEO and co-found Niraj Shah, who blamed factors such as the weak macroeconomic conditions in Germany, a lack of brand awareness and its limited scale.
In the end, he said, achieving market-leading growth in Germany would be “long and costly” and lag potential returns elsewhere.
To that point, finance chief Kate Gulliver told CNBC that the focus is on prioritizing investments where the company can make a better return.
Although it’s the fourth round of layoffs since 2022, this time it is more about capital allocation than cost savings, she said, adding that there are better ROI initiatives in places like the UK and Canada. The company is also focussing more on physical retail after opening its first bricks-and-mortar store outside Chicago last May, with plans to open more in the U.S. soon.
Wayfair needs to boost its topline growth after its Fiscal third quarter showed sales fell 2% to $2.9 billion.
Is Wayfair a Good Stock to Buy Now?
Overall, Wall Street has a Moderate Buy consensus rating on W stock, based on 14 Buys, ten Holds and no Sells. The average W price target of $71.15 implies about 60% upside potential. Shares of W have declined 21% in the last year.
