Tech companies continue to lay off employees. Is fashion next?

Big Tech has already laid off more than 100,000 employees globally this year, according to, with Chinese media giant Tencent and buy-now-pay-later company Affirm among the latest to cut staff.

Fears that cuts at Microsoft and Amazon would lead to job losses in the wider economy have so far proved unfounded. Despite warning signs that the economy is headed for a period of slow growth, or even recession, the US jobless rate fell to 3.4 percent in January, a 53-year low.

Still, fashion hasn’t been entirely immune to the need to cut costs. Neiman Marcus, PVH, VF Corp., Everlane and H&M are just a few of the retailers that have announced layoffs in recent months. Many cited economic uncertainty as the main reason for reducing headcount as consumer spending began to cool in the second half of 2022 (although US retail sales unexpectedly rose in January).

Retailers reliant on online sales are worse off as they are also making up for the post-pandemic backlash in online shopping. Canadian e-tailer Ssense, for example, laid off 138 employees or 7% of its total staff last month, while The RealReal said it would eliminate 230 jobs last week, or about 7% of its workforce as well.

For fashion companies bracing for a year of stagnating or falling sales, eliminating non-core corporate salaries and closing underperforming stores are relatively easy levers to pull.

“Many brands and retailers expect 2023 to be a very weak year in terms of growth,” said Neil Saunders, managing director of consultancy GlobalData. “When people are predicting declines, it’s about cutting costs to meet (muted) demand.”

course correction

For some e-commerce companies that have shed jobs in recent months, it was a matter of correcting a wave of aggressive hiring in 2021, when tech valuations and growth expectations were at an all-time high.

Last July, Shopify announced that it would cut 10% of its workforce, or 1,000 employees. Chief executive Tobias Lütke said in a memo at the time that he had made the wrong choice to expand the platform in 2020 in response to what turned out to be a temporary increase in online shopping activity.

For others, the layoffs are a necessary measure to protect profits at a time when sales are low.

The first signs of a slowdown appeared last summer, when the wave of post-pandemic growth – fueled by pent-up demand, high savings and joy that the world is open again – began to lose steam. Second-quarter sales for companies including PVH and VF Corp. dropped year on year, a decline that carried over into the holiday season for many brands.

In general, retailers have lowered their 2023 forecasts as they face not only falling consumer confidence but also an increase in the cost of operations, including raw materials and shipping. They also had to discount more products to reduce excess inventory, hurting margins.

“With cost pressures mounting and demand weakening, the bottom line will come under a lot of pressure, and many retailers are trying to avoid that,” Saunders said.

Barring an economic miracle, more layoffs are likely to follow. Public companies face shareholder pressure to keep costs low. Big, established retailers may attract activist investors who will push for even deeper cuts, while startups that have seen their post-IPO share prices plummet are struggling to accelerate their timeline to reach profitability.

“In many cases layoffs really were the right decision,” he added. “During the 2021 boom, many retailers were excited about recruiting and based this on future forecasts of strong demand that is now waning.”



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Compiled by Diana Pearl.

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