Etsy has spent the past few years trying to revive growth after the pandemic-era online shopping boom faded.
Some of those efforts appear to be working, but the company is still making another sizable reduction to its workforce.
Etsy is eliminating approximately 220 jobs, or about 12% of its workforce, as part of a restructuring announced alongside its second-quarter results.
Most of the changes will be concentrated in Product & Engineering. After the restructuring, Etsy expects to employ approximately 1,600 people.
Etsy cuts roughly 220 jobs
CEO Kruti Patel Goyal said Etsy is restructuring its teams to create fewer organizational silos and flatter groups capable of handling broader, more complex problems.
“First, our goal wasn’t to cut costs. Cost savings are a consequence of these changes, but they are not the objective,” said Goyal.
She said the company is making the changes during a period of stronger momentum so it can move faster and concentrate investment in capabilities it sees as important for future growth.
Etsy expects to record roughly $35 million in restructuring charges, primarily related to severance, employee benefits, and other costs.
The plan is expected to be substantially completed by the end of the third quarter.
Peter Banko, a veteran health system CEO and organizational transformation expert, said: “Restructuring before a company reaches a crisis can give management more room to act deliberately.”
“There is never a wrong time to do the right thing,” Banko told TheStreet. “It is bold and admirable to see a company like Etsy undertake a major restructuring when it is not in crisis.”
Banko also pointed to Etsy’s severance package as an important part of how the company is handling the reductions.
“How you treat people leaving your company is more important than how you treat people on the way in,” he said.
Affected employees will receive at least 16 weeks of severance pay, with additional compensation based on tenure, along with continued health care support for up to 12 months for U.S. employees and other benefits.
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Etsy layoffs come as sales improve
The timing stands out because Etsy’s core marketplace is showing signs of recovery.
Second-quarter Etsy marketplace gross merchandise sales reached $2.6 billion, up 7.5% from a year earlier.
Revenue totaled $668 million, rising 9.3% for the standalone Etsy marketplace, while adjusted EBITDA reached $195 million with a 29.2% margin.
Etsy also raised its full-year outlook, now expecting mid-single-digit growth in marketplace gross merchandise sales (GMS) and an adjusted EBITDA margin of 29% to 30%.
While Goyal said reducing costs was not the objective, CFO Lanny Baker acknowledged that the restructuring will lower near-term operating costs and that the expected benefit has already been incorporated into Etsy’s higher margin outlook.
Etsy’s restructuring also comes shortly after another major strategic shift.
On July 30, the company completed the sale of fashion resale marketplace Depop to eBay for approximately $1.4 billion in cash.
The deal was originally announced at a $1.2 billion purchase price, but the final proceeds included about $200 million in net purchase-price adjustments and interest.
Etsy said the divestiture would allow it to sharpen its focus on its core marketplace.
Etsy acquired Depop for about $1.6 billion in 2021.
The company also announced a new $2 billion share repurchase authorization alongside its second-quarter results, saying that proceeds from Depop would allow it to accelerate stock buybacks.
Etsy says layoffs were not driven by AI
Etsy explicitly told employees that artificial intelligence did not drive the reductions.
The company said its goal is to combine employees with new technology rather than replace workers with it, even as AI changes the skills and capabilities it needs.
Etsy plans to deepen expertise across product, engineering, and customer operations, with particular emphasis on machine-learning skills.
TheStreet has previously reported on Etsy’s broader push into AI-powered shopping and product discovery.
This is also not Etsy’s first major workforce reduction in recent years.
In December 2023, the company announced plans to eliminate approximately 225 jobs, or about 11% of its core marketplace workforce.
However, that restructuring came under different circumstances.
Etsy said at the time that gross merchandise sales had remained largely flat while employee expenses continued to rise, and it explicitly tied the move to efforts to reduce operating costs.
The latest cuts come as marketplace growth is improving, making Etsy’s decision to reshape its workforce, despite stronger financial performance, notably different from its previous restructuring.
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