According to media reports on Friday, US ride-hailing company Lyft is implementing a new round of significant layoffs, possibly cutting over 30% of its workforce, affecting at least 1,200 people. These layoffs may help Lyft reduce costs by 50%.
Lyft had previously laid off about 700 employees at the end of last year. Currently. The company has more than 4,000 employees, not counting drivers. Lyft originally planned to announce these layoffs after next week's board meeting. The layoffs come just days after new CEO David Risher officially took over.
Following the news, Lyft's stock price briefly surged, reversing a previous drop of over 1% and rising more than 4% during the day.
In a statement to employees, Lyft's CEO said that the significant layoffs are part of the company's restructuring plan. The company needs to reduce operating costs, save on human resources expenses, and invest in improving pricing competitiveness. Lyft aims to provide passengers with affordable rides, generate considerable income for drivers, and achieve company profit growth. The company will maintain previously issued guidance, and all offices will temporarily close on Thursday, April 27th.
In the statement, Risher did not provide specifics on the scale of the layoffs, saying the company plans to inform employees of more details next week.
Lyft has been striving to catch up with its powerful competitor, Uber:
As the US reopened after the COVID-19 pandemic, a labor shortage emerged. Lyft introduced bonuses and new features to attract drivers, but at a slower pace than Uber. During the pandemic, Uber gained market share and more drivers.
In terms of business strategy, Lyft chose not to diversify its business development and restricted its operations to North America. In contrast, Uber has a food delivery business and global operations.
Stock prices further illustrate the issue. Lyft's current stock price is only about 12% of its historical high in 2019, while Uber's stock price is about 48% of its historical high in 2021.
Lyft's performance in the last earnings quarter was particularly poor. The company's Q4 results exceeded expectations but guidance was significantly below estimates, projecting an adjusted pre-tax profit of $5 million to $15 million for Q1 2023, well below the average expectation of $83.6 million. This caused the company's stock price to plummet 36% in a single day, marking the largest single-day drop since its IPO. Lyft will announce its latest earnings report on May 4th.
At the end of March, facing stiff competition and a frustrated stock price, Lyft appointed board member David Risher as its CEO under pressure from some employees and investors. The company's two co-founders, Logan Green and John Zimmer, stepped down from management roles. Risher officially became CEO on April 17th.
Risher recently said that he believes boosting employee morale is his top priority. He also discussed reshaping the company's approach to passengers and drivers.
Lyft's major layoffs are just a snapshot of the job cuts many tech companies are experiencing. Many companies have spoken about the problem of excessive hiring during the past two years of economic prosperity. According to data from Layoffs.fyi, more than 170,000 people have lost their jobs at tech companies worldwide this year.
The Wall Street Journal previously reported that a wave of unemployment has swept the tech and finance industries in the US, with the number of high-income individuals receiving unemployment benefits increasing fivefold in a year. According to a survey by the US Census Bureau as of April 10th, approximately 113,800 adults in US households with an annual income of at least $200,000 received unemployment benefits in the past
