Etsy (ETSY.US) exceeded revenue expectations but laid off 12% of its staff; the new CEO said it is "restructuring for growth."

Etsy (ETSY.US) announced on Wednesday that it will be cutting approximately 220 positions, which accounts for about 12% of its total workforce. This move aims to simplify the organizational structure and accelerate innovation in the face of increasing competition in the e-commerce sector. Kruti Patel Goyal, who recently took over as CEO earlier this year, noted in a memo to employees that this layoff will help the company build a new organizational structure that we believe is necessary for Etsys future. According to the company, the layoffs will primarily impact the product and engineering teams. The layoff plan was announced in conjunction with Etsy's Q2 financial report. In its letter to shareholders, the company emphasized that this adjustment is not aimed at cost-cutting, but rather hopes to invest fully during a period of strong growth momentum to act faster and focus execution. A spokesperson for Etsy also stated that these layoffs are unrelated to artificial intelligence (AI). Patel Goyal wrote in the memo: I have said that our top priority is to get the business back on a growth track. But our ultimate goal is always to elevate Etsy to a higher stage of development to fully realize our mission and potential. Right now, we are at a moment where a transition is needed to build a team, culture, and organizational structure that can support this goal. Etsy operates a digital marketplace known for handmade and artisan products. During the COVID-19 pandemic, Etsy saw rapid growth as consumers flocked to online retailers. However, with the easing of lockdown measures and shoppers returning to physical stores, the company has struggled to maintain this growth momentum. At the same time, Etsy is also facing intensifying competitive pressure from established rivals such as Amazon.com, Inc. (AMZN.US) and Walmart Inc. (WMT.US), as well as emerging e-commerce platforms like TikTok Shop and Temu. Under the leadership of Patel Goyal and his predecessor Josh Silverman, Etsy has been focused on strengthening its brand position as a unique goods marketplace, while clearing out mass-produced items and common goods sold by resellers on its platform. In June of this year, Etsy launched an advertising campaign called Shop Other Jeffs during Amazon.com's Prime Day promotion, featuring not billionaire Jeffs, sending a clear competitive signal to Amazon.com. Additionally, the company has optimized its website's search functionality to provide more personalized search results, helping users discover their desired products more efficiently. So far, these initiatives seem to be paying off. In the second quarter, Etsy achieved revenues of $668.3 million, exceeding analyst expectations of $649.1 million, with gross merchandise sales (GMS) in core markets growing by 9.3% year-over-year. The company also raised its full-year GMS forecast, now expecting mid-single-digit growth, compared to the previous low-single-digit expectations. Etsy anticipates GMS for the third quarter will be between $2.53 billion and $2.58 billion, above the market consensus expectation of $2.49 billion. Despite a continued year-over-year decline in the number of buyers on the Etsy platformactive buyers in the second quarter numbered 87 million, a decrease of 0.4% year-over-yearthe number of sellers on the platform has increased for two consecutive quarters, reaching a total of 5.7 million sellers in the second quarter, up 5.9%. In terms of financial performance, Etsy reported a net loss of $46.65 million in the second quarter, translating to a loss of $0.36 per share, compared to a net profit of $28.84 million or $0.25 per share in the same period last year. The net loss includes the impact of discontinued operations, including the recently completed $1.4 billion cash sale of Depop to eBay (EBAY.US). Etsy acquired the second-hand trading platform five years ago for $1.6 billion. As part of its strategy to focus on core market businesses, Etsy had previously started to divest other brand assets. From the perspective of continuing operations, the diluted earnings per share was $0.98, compared to $0.39 in the same period last year, while the market had expected this metric to be $0.75.