After more than doubling its workforce in the past two years, Wayfair is tapping the brakes.
The online seller of furniture and other home goods said Thursday that it would cut 550 employees worldwide, as its chief executive acknowledged the Boston-based company had grown too quickly and become less efficient as its red-hot sales growth shows signs of cooling.
“We find ourselves at a place where we are, from an execution standpoint, investing in too many disparate areas, with an uneven quality and speed of execution,” chief executive Niraj Shah said in an e-mail to employees. “Through two years of aggressive expansion, we no doubt built some excess, inefficiency, and even waste at times, in almost every area.”
While the job cuts aren’t severe — Wayfair said they would affect 3 percent of its 17,000 workers, including 350 in Boston — they mark a moment of reckoning for a company that is one of the state’s few consumer-focused tech superstars.
Even as revenue soared 37.5 percent to $6.6 billion in the first nine months of last year, Wayfair has failed to turn a profit. Its executives have argued that despite a prolonged track record of losses, the company has been in growth mode, investing heavily in its supply chain and European expansion. Its board members and executives point to Amazon as a model, which for years was unprofitable and funneled revenue back into growth.
But Wayfair’s critics argue that selling furniture is more challenging than shipping books and boots — and besides, Amazon is now positioning itself to become one of Wayfair’s largest competitors online.
Some analysts downplayed the significance of the cuts. Sucharita Kodali, a retail analyst at Forrester, said Wayfair, like many fast-growing and unprofitable digital companies, clearly decided to make cuts to appease Wall Street. But the company did not appear to be facing cash constraints. “They’re only laying off 3 percent,” she said. “It’s not that many.”
Over the past year before Thursday, Wayfair’s stock lost 20 percent while the benchmark Standard & Poor’s 500 index climbed 23 percent. Wayfair fell 14 percent Thursday to $82.16 a share.
Wayfair said none of the layoffs will affect a new service center in Pittsfield, for which it received $31.4 million in state subsidies to open in 2018.
The job cuts rattled a workforce that has grown so large that employees often wait in line for the escalators up to its offices in the Copley Place mall. At 2 a.m. Thursday, employees got a Slack message that said the company had locked some internal systems, so engineers would not able to deploy code or make significant data changes.
Several employees said workers who were about to lose their jobs were notified by e-mail at about 9:30 a.m. that they would be affected by major organizational restructuring. They were invited to conference rooms in groups of 50 to 100 people, one employee said, where they were informed they’d lost their jobs. Around 10 a.m., scores of employees, many of them visibly upset, began to descend the escalator from Wayfair’s headquarters.
Dharmesh Mistry, a senior research manager at Wayfair in Boston, had Thursday off.
“I woke up in the morning to texts and e-mails like, ‘Are you OK? Did you hear the news?’ ” he said. “And I was like, ‘What are you talking about?’ ”
Friends told him to check his e-mail, but it was locked, along with his internal Slack messaging account and company laptop.
“I had to come in to see what was happening,” he said. “No one was willing to tell me anything — they were just trying to figure out who I should talk to.”
Mistry was taken to human resources, where he was told that he would get four weeks’ severance. As an immigrant with a visa, he said, he didn’t think he could obtain government approval to work elsewhere that fast.
"To find another company that is going to go on with your green card, in this day and age, no one is going to do that,” he said. “My life is over.”
The company did not release details on the severance packages it offered laid-off workers.
In November, the company e-mailed several of its recruiting contacts saying it would not recruit entry-level employees in 2020. It has also scaled back recruitment on college campuses in recent months, according to one employee who asked not to be named for fear of retribution.
In an internal memo issued in November of last year and obtained by the Globe, Wayfair’s chief technology officer, Jim Miller, said the company was implementing a “headcount review process” for its engineers that would “move our focus from aggressively hiring . . . new people and instead, turn focus and time towards developing our current team members to their full potential.”
Miller said that the company had expanded its engineering team by 68 percent in the 12 months prior, and that 57 percent of its engineers had less than a year on the job. The hiring slowdown, he wrote, was “absolutely not” a hiring freeze, but would “encourage more focus, discipline, and collaboration across departments." He encouraged managers to spend more “quality time on reviews.”
The internal review process for engineering managers was recently updated to put a stricter curve in place, resulting in more employees being evaluated as “underperformers," according to several current employees who asked not to be identified. That change, they said, led to fearful internal rumors about layoffs in the last few weeks.
In June of last year, hundreds of employees walked off the job after learning that Wayfair had been supplying beds to a nonprofit contractor operating migrant detention facilities at the southern US border.
As the protests led to threats of consumer boycotts, the company’s cofounders, Steve Conine and Shah, said they would convene an internal committee to consider the protesters’ requests. After months of meetings, the company agreed to the committee’s requests two weeks ago, according to a memo obtained by the Globe, and said it would use the Southern Poverty Law Center’s “Hate List” as a guide when excluding possible clients for furniture sales. The company also agreed to implement new corporate social responsibility policies, like giving employees the day off to vote and establishing a senior leader accountable for business ethics concerns.
“It was a big win,” said one employee who was involved in the walkout and requested anonymity. “Many people felt for the first time that Wayfair was really engaging and listening to its employees in a way that was markedly different pre-walkout,” they said.
So having an abrupt firing of the staff feels like a slap in the face, the employee said. “It feels like, ‘Why bother?’ ”
Globe correspondent Anissa Gardizy contributed to this report.