Wayfair (NYSE:W) has become the talk of the town as the e-commerce titan announces a significant reduction in force to streamline its operations.

The company is undergoing a downsizing process, resulting in the dismissal of 1,650 employees, which accounts for 13% of its total global workforce. Furthermore, 19% of its corporate workforce will be impacted by the layoffs.

As a consequence, Wayfair anticipates bearing costs in the range of $70 million to $80 million associated with severance and benefits, though these charges are expected to be primarily incurred during the first quarter of 2024. Nevertheless, the scaling back is projected to deliver annual cost savings surpassing $280 million for the company.

The Rationale Behind the Layoffs

The CEO, co-founder, and co-chairman of Wayfair, Niraj Shah, provided insight into the underlying causes for the job cuts:

“While today’s actions will bolster our Adjusted EBITDA roadmap, I am increasingly focused on generating Adjusted EBITDA in excess of equity-based compensation as well as capital expenditures, and intend to drive meaningful improvements here quickly. We believe that what matters is maximizing our Free Cash Flow while simultaneously tightly controlling and ultimately reducing total share count, and are treating this as our north star.”

It should also be noted that Wayfair was among the enterprises that ramped up hiring during the Covid-19 pandemic. Since then, the company has been on a trajectory of contraction, with the current round of job eliminations marking the third such instance since the summer of 2022.

Notably, W stock has surged by 14.1% as of Friday morning.

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On the date of publication, William White did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.