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Diving brief:
- REI is quit your experimental activity into effect this week and eliminating hundreds of jobs as a result, the outdoor retailer said in a statement Wednesday. The experiences division includes adventure travel, day trips and REI courses.
- The layoffs will affect 180 full-time and 248 part-time employees, while some workers who split their time between divisions may be able to take on a different role. Full-time employees will receive benefits and salaries through March, as well as severance, COBRA and outplacement services. Part-time employees will receive benefits through January, as well as severance pay.
- In a message shared with employees, REI CEO Eric Artz framed the decision as a financial one, noting that the company’s experiences arm “costs far more to run than it makes.” Artz added that running a cooperative “requires a sustainable business model, capable of investing at the appropriate level to fully fund our most critical strategic ambitions.”
Dive overview:
REI’s search for renewed profitability has once again led to job cuts.
The latest in a series of layoffs at the outdoor retailer, REI is cutting more than 400 positions in its search for stronger financial footing. The retailer laid off more than 350 people last January, it was the third round of layoffs in less than a year, and remove seven more people in August by reorganizing its experience division.
Today, the Experience division is completely dissolved after more than 40 years of activity. While Artz expressed gratitude for the work of REI Experiences employees, saying they had “done nothing wrong” and had “worked extremely hard,” he said the company did not simply didn’t make financial sense and only reached 0.4% of the retailer’s customers last time. year.
“When we look at the overall costs of running this business, including costs like marketing and technology, we are losing millions of dollars every year and subsidizing experiments with profits from other parts of the business,” Artz said. “Even at our peak in 2019 – our best year for experiences – we generated no profit. »
Although REI is closing operations for the time being, Artz said he believes the retailer has a place in education and local communities in the future and is funding a small team to explore other options for courses in 2025. The company’s local marketing teams will also be reincorporated. in the largest organization.
“We held out as long as possible, but the fact remains that the experiments are not profitable for the cooperative and we need to adjust our course,” Artz said. “Each path to profitability that we explored would have required us to invest more time, effort and move away from parts of the business that touch many more customers, generate more positive financial results and have a greater impact on our mission of getting people out.
Although REI is a private company and therefore not required to report its financial statements, the retailer announced in 2023 that it tipped to a loss in 2022 – and Artz has since repeatedly stressed the importance of returning to profitability. Although results for 2024 have not been finalized, Artz said the retailer would be close to break-even in terms of pre-dividend operating profit and free cash flow. The retailer is still focused on expanding in certain areas, including plans to open new stores. RI hired a new head of marketing in November and around the same time instituted a new return policy to prevent serial offenders from abusing its policy.