By Sabrina Escobar

Wayfair stock fell Friday morning after the online furniture seller said it was shutting down its business in Germany and cutting a little over 700 jobs in a bid to focus on more profitable growth areas.

The business in Germany will be shut down effective immediately, Wayfair said. As part of the restructuring, the company plans to lay off approximately 730 employees in Germany and Poland, although management expects about half of these positions will be relocated to other corporate offices.

Wayfair also expects to incur between $102 million and $111 million in charges tied to winding down operations. That will include up to $44 million in employee-related costs such as severance and relocation expenses.

Shares of Wayfair were 3.4% lower at $43.79 in early morning trading Friday. The stock has shed about 18% in the past 12 months.

Wayfair started operating in Germany 15 years ago, making it one of the company's first European markets along with the U.K. Since then, Wayfair said, growth in the U.K. business has outpaced that in Germany.

Despite efforts to close the gap, the company has decided that "achieving market-leading growth in Germany still remained a long and costly endeavor, and one that is increasingly lagging the potential return we see in other areas," wrote CEO Niraj Shah in a letter to employees Friday.

Economic conditions in Germany haven't favored online furniture retailers, the company said, and Wayfair has struggled to improve its brand awareness and increase its scale.

The company plans to reallocate investment and efforts to areas with greater long-term potential, Shah wrote, including expanding in Canada, the U.K., and Ireland.

Wayfair is also focusing on expanding its fleet of physical stores in the U.S.

While the company had tinkered with pop-up shops and a smaller location before the pandemic, it opened its first large-format store in Illinois last May, and plans to open more in the coming years. The company has already opened stores for some of its smaller furniture brands, including AllModern, Birch Lane, and Joss & Main, and will open two more shops for Perigold, its luxury furniture platform, this year.

"We're just going to do it very methodically, basically prove out that the economics work, then we'll open up some more, prove out that they work, keep improving the performance, then we'll open up more," Shah said speaking at a Morgan Stanley conference in December.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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January 10, 2025 09:50 ET (14:50 GMT)

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