Groupon is to lay off or furlough 2,800 staff, making up about 44 percent of its total workforce, as it grapples to stay afloat amid the coronavirus pandemic.
The daily deals provider has become the latest business casualty of the outbreak’s economic fallout, just days after US unemployment skyrocketed to its highest peak in 80 years.
In a regulatory filing on Monday, Groupon announced that it will lay off or furlough 2,800 staff, after local unit performance dropped by 70 percent in North America in April compared to this time last year.
The layoffs will make up part of a ‘multi-phase’ restructuring plan, with the first phase seeing 1,400 jobs slashed this summer through to July 2021.
Groupon is to lay off or furlough 2,800 staff, making up about 44 percent of its total workforce, as it grapples to stay afloat amid the coronavirus pandemic
The second phase of the restructuring will take place by the end of the third quarter, and will include the further 1,400 job cuts, as well as facilities exit costs and non-cash impairment charges.
The move comes as its business faces ‘material deterioration’ since local merchants – which the company acts as a middle man between them and the customer – have closed down due to shelter-in-place orders.
‘The temporary closure of businesses including restaurants and bars, event venues, and spas, resulted in a material deterioration in the company’s performance in March 2020,’ the company said in the filing with the Securities and Exchange Commission.
The deals business has also been hit by a spike in refunds in the first quarter, it said, as panicked shoppers and newly unemployed people avoid spending on non-essential goods during the crisis.
The firm has not specified which roles will be hard hit, but in its 2019 annual report the online deals firm said it had 6,345 employees.
Of these, 2,358 workers are based in North America, including 1,600 at its headquarters in Chicago.
Executive pay will also be slashed to help ‘flatten the organizational structure’ and there will be a hiring freeze, the organization said.
The online deals firm is also planning to ‘phase down’ its goods category by the end of the year, in a shift toward a third-party marketplace model that would place responsibility for order fulfillment and returns on the merchants.
New jobless claims (above) totaled 17 million in the past three weeks. The panel of business economists predicted net job destruction in Q2 would total 4.5 million
Shares of Groupon Inc. plunged 3.2 percent following the news, to close at 87 cents Monday.
Although higher than its record closing low of 49 cents on March 18, it is still down a staggering 67.2 percent year to date.
The board has set up a ‘poison pill’ anti-takeover strategy, to defend against one investor or investor group taking advantage of the share volatility to take more control of the company.
‘The [rights plan] may cause substantial dilution to any person or group that attempts to acquire the Company without the approval of the board,’ the company said in a statement.
Groupon faces ‘material deterioration’ since local merchants – which the company acts as a middle man between them and the customer – have closed down due to shelter-in-place orders
It added: ‘Given the current unprecedented environment and trading levels as well as the importance of maintaining focus on the company’s operations, safeguarding the welfare of employees and serving customers, the board believes adopting the Rights Plan is in the best interest of all Groupon stockholders.’
As yet another firm is forced to lay off staff, unemployment continues to skyrocket across the US.
Nearly 17 million Americans filed for unemployment over the last three weeks, pushing the jobless rate to its highest point since 1940 at 14.7 percent.
A panel of top business economists warned that the damage could be lasting, saying that the US economy faces a slow and painful recovery with high unemployment through 2021.
The net number of jobs destroyed by the US economy’s crisis-driven sudden stop could top 4.5 million this quarter, according to the median estimate of 45 forecasters surveyed by the National Association for Business Economics.
Fewer than 2 million of those positions will be recovered by the end of 2021, the economists expect, pushing the unemployment rate above 6 percent for the next 21 months in a massive blow to a labor market that had recently been considered among the best for workers in decades.
In February, the US unemployment rate was about 3.6 percent.
As major retailers and restaurant chains have shuttered, small businesses have also been hard hit.
Small business layoffs surged by more than 1,000 per cent in March compared to February – with April expected to be even worse.
A data survey of more than 100,000 small businesses nationwide found that layoffs in March jumped by a staggering 1,021 per cent.
Thousands of people across America lining up at food banks as the spread of sudden unemployment takes its toll on families across the country.
The IRS began depositing the first wave of $1,200 stimulus checks this weekend, but for many that money will not be nearly enough to keep food on the table.
More than 25,000 Americans have so far died from coronavirus, with confirmed cases reaching almost 604,000.