Tags: Etsy | job cuts | Josh Silverman | Chad Dickerson

Etsy Replaces CEO, Plans to Cut 8 Percent of Jobs to Reduce Costs

Etsy Replaces CEO, Plans to Cut 8 Percent of Jobs to Reduce Costs
(Dreamstime)

Wednesday, 03 May 2017 12:27 PM

Etsy Inc. named director Josh Silverman as chief executive officer, replacing Chad Dickerson, and said it’s cutting 8 percent of its workforce as it copes with slowing sales growth. The shares tumbled as much as 21 percent.

Silverman will take the reins at Etsy effective Wednesday, the company said in a statement late Tuesday. Dickerson, who led the artisan craft marketplace for six years, will also step down as chairman, to be replaced by Union Square Ventures co-founder Fred Wilson, a longtime investor in the company.

Brooklyn, New York-based Etsy also reported first-quarter revenue of $96.9 million, missing analysts’ average estimates. Though sales gained 18 percent, it was the company’s fourth straight period of slowing growth. The stock dropped as low as $8.96 in extended trading after news of the executive change and earnings report.

Hedge fund Black-and-White Capital LP disclosed that it held a 2 percent stake in Etsy earlier Tuesday and said it’s urging the company to re-accelerate revenue growth and reduce bloated operating costs. Etsy, which has faced a slowdown in the number of new sellers and buyers added to its platform and the amount of transactions flowing through its marketplace, said in the statement it plans to eliminate 80 jobs.

Silverman sidestepped a question on a conference call Tuesday about why he thinks Etsy should stay independent rather than sell itself. There’s a “tremendous opportunity for Etsy it’s only begun to tap and a very bright future,” he said.

As CEO, he said he’ll be focused on driving more traffic to the marketplace, getting visitors to actually spend money and increasing loyalty to Etsy. The company traditionally has spent very little on marketing, so there are opportunities to pay for more users, he said.

Etsy, which has said it expects gross merchandise sales -- the total value of items sold through the platform -- to gradually decline, has increasingly depended on selling additional services to its sellers to generate revenue. Seller Services, the category that includes such products as shipping labels, promoted listings on the marketplace and a payments processor, now makes up more than 55 percent of total revenue. Even though these services have bolstered Etsy’s sales, growth in that business line is also slowing. In the long term, the company’s prospects are still highly dependent on convincing buyers to keep spending money on its sites.

“There are a lot of irons in the fire in terms of products and initiatives that they’re going after -- they’re trying to build new revenue streams when the vision is yet to be executed against on the core,” said James Cakmak, an analyst at Monness Crespi Hardt & Co. “When you’re a niche destination in the world of Amazon, scale does matter.”

Wooing Users

In recent years, Etsy has been spending heavily to improve the user experience on its website, mobile application and search functionalities, even buying an artificial intelligence startup to help those efforts. Product development expenses jumped 48 percent in the first quarter. While the company said it cut some costs starting late last year, operating expenses still jumped 36 percent from the year-earlier period.

The company expects to incur severance charges and other costs of $4.5 million to $6 million related to the job cuts, which will be recognized through the end of 2017. Since the fourth quarter of 2015, Etsy’s workforce had swelled by 30 percent, ending March at 1,062.

Etsy on Tuesday also said Chief Technology Officer John Allspaw will depart the company. Mike Brittain, vice president of engineering, was named interim CTO. Last month, the company named Rachel Glaser as its new chief financial officer, replacing Kristina Salen, whose exit was announced in November.

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Etsy Inc. named director Josh Silverman as chief executive officer, replacing Chad Dickerson, and said it's cutting 8 percent of its workforce as it copes with slowing sales growth. The shares tumbled as much as 21 percent.
Etsy, job cuts, Josh Silverman, Chad Dickerson
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2017-27-03
Wednesday, 03 May 2017 12:27 PM
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