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Dive Summary:
- REI is exiting its experiences business effective this week and will cut hundreds of jobs as a result, the outdoor retailer said in an announcement Wednesday. Sharing experiences include REI adventure trips, day tours and classes.
- The layoffs will affect 180 full-time and 248 part-time employees, while some workers who split time between divisions may be able to take on a different role. Full-time employees will receive their benefits and pay in March, as well as severance, COBRA and work-at-work services. Part-time workers will receive benefits through January, along with severance pay.
- In a message shared with employees, REI CEO Eric Artz framed the decision as a financial one, noting that the experiences arm of the business “costs a lot more to run than it brings in.” Artz added that running a collaboration “requires a sustainable economic model that is capable of investing at the appropriate level to fully fund our most critical strategic ambitions.”
Dive Insight:
REI’s quest for renewed profitability is once again leading to job cuts.
The latest in a string of layoffs at the outside retailer, REI is cutting more than 400 positions in its search for a stronger financial footing. The retailer laid off more than 350 people last January, its third round of layoffs in less than a year, and cut another seven people in August as it reorganized its experience division.
Now, experience sharing is being completely dissolved after more than 40 years of operation. While Artz expressed appreciation for the work of REI’s experience employees, saying they did “nothing wrong” and “worked extremely hard,” he said the business simply didn’t make sense financially and only reached 0.4% of customers. of the last seller. year.
“When we look at the overall costs of running this business, including costs like marketing and technology, we’re losing millions of dollars every year and subsidizing Experiences with profits from other parts of the business,” Artz said. “Even at our peak in 2019 — our best year for Experiences ever — we didn’t generate a profit.”
Although REI is shutting down business for now, 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 classrooms in 2025. Marketing teams The local company will also be reincorporated into the larger organization.
“We’ve hung on as long as possible, but the fact remains that Experiences is an unprofitable business for the co-op and we need to correct course,” Artz said. “Every path to profitability we explored would require us to invest more time, effort and focus away from the parts of the business that reach the most customers, drive the most positive financial results and have the greatest impact on our mission to get people out.”
Although REI is a privately held company, and therefore not required to report financials, the retailer announced in 2023 that it would post a loss in 2022 — and Artz has repeatedly emphasized the importance of returning to profitability since then. Although 2024 results have not been finalized, Artz said the retailer will be near the bottom in terms of pre-dividend operating income and free cash flow. The retailer is still focused on expanding in several areas, including plans to open new stores. REI hired a new chief merchandising officer in November and at the same time instituted a new return policy to stop serial offenders from abusing its policy.
