Ride-hailing giant Lyft (NASDAQ: LYFT) confirmed it would reduce 1,200 or more job positions in the latest round of layoffs as the company continues its efforts to cut costs. The news was first reported by the Wall Street Journal.
The fresh staff reductions could affect more than 30% of Lyft’s total workforce, with the company planning to officially announce the move after a board meeting next week. The layoffs could help the company reduce its costs by 50%, the report added.
The move comes just days after a new CEO, David Risher, took control of the company. Lyft already laid off around 700 employees in late 2022 in the previous round of layoffs.
“We need to bring our costs down to deliver affordable rides, compelling earnings for drivers, and profitable growth.” Those things “require us to reduce our size and restructure how we’re organized,” Risher told employees in a memo.
The note did not disclose the size of the layoffs as the company plans to share more details next week.
“I own this decision, and understand that it comes at an enormous cost,” he added.
Affected employees will receive at least 10 weeks of pay, while team members with over 4 years at the company will receive more than that.
Struggling to Keep Up With Uber
The San Francisco, California-based ride-sharing firm has been struggling to keep pace with its rival Uber, which saw significant growth during the coronavirus pandemic. Meanwhile, Lyft also decided not to expand its operations beyond transportation and restricted its business to North America, while Uber capitalized on its food delivery business and global expansion.
LYFT is down 5.3% YTD.
Lyft daily chart (Source: TradingView)
In addition, Lyft was slower than its rival to offer bonuses and launch new features to lure drivers amid a prolonged labor shortage as the U.S. economy reopened after the pandemic-induced lockdown restrictions.
As a result of these struggles, Lyft’s shares dropped almost 70% in the past year, compared to the decline in the broader Nasdaq Composite index of 8%. During that period, Uber’s shares lost just 3% of their value.
Earlier this year, Lyft’s co-founders Logan Green and John Zimmer stepped back from their management duties at the company after months-long disputes with some investors and employees. As a result, Green and Zimmer began searching for a new candidate to take over the top job, eventually hiring Risher.
Risher, who formally stepped up as Lyft’s new CEO on April 17, previously served on the company’s board. He said in a recent interview that restoring employee morale will be his top priority as the new head of the company, as well as reinventing the relationship between Lyft and its drivers and customers.
Lyft’s upcoming job reductions will mark another major round of layoffs in the tech sector, which has cut over 170,000 positions in 2023, according to Layoffs.fyi.
Last month, Mark Zuckerberg’s Meta Platforms announced it was cutting 10,000 jobs in the coming months after letting go of 11,000 employees in late 2022, affecting roughly 25% of its total workforce in total. Moreover, Zuckerberg said last week that the possibility of more layoffs in the future is not ruled out.
But as opposed to Meta, Lyft’s start to 2023 was not as good. The company’s shares took a dive in February when it reported an unexpected Q4 loss and issued a worse-than-expected forecast for the first-quarter revenue.
Lyft posted an adjusted loss of 74 cents per share in the fourth quarter, compared to analysts’ expectations of a profit. The ride-hailing company reported a net loss of $588.1 million, or $1.61 per share, up from $283.2 million, or 83 cents per share, in the same period last year.
For the current quarter, the company expects revenue to be around $975 million, compared to $876 million in the year-ago period, though still below the consensus estimates of $1.09 billion.
The forecast came after Lyft reported it had 20.4 million riders in the fourth quarter, the highest in almost three years, resulting in a 21% year-over-year revenue growth to $1.18 billion, beating the Wall Street estimates.
“Ride-share is back,” Zimmer said in an interview then.
Zimmer said the Q1 outlook was affected by seasonal trends as consumers set more health-focused goals at the start of the year like going out less and walking more. Also, the ride-sharing market has been improved as there are now enough drivers to meet the demand, resulting in lower ride fees.
The recent driver shortage has propelled ride-sharing prices to record highs at Uber and Lyft, but the latter is no longer facing that issue, helping it earn $57.72 in revenue per active order in the fourth quarter.
The company said its quarterly results were affected by $201.3 million of stock-based compensation and related payroll tax costs, as well as restructuring expenses stemming from the previous round of layoffs.
Lyft announced massive job cuts as the company aims to become a leaner, more streamlined business. The ride-sharing business also reaffirmed its Q1 revenue, margin, and adjusted EBITDA forecast.
As a result, Lyft shares trade near all-time lows.