The retail industry is experiencing layoffs, predominantly affecting corporate staff. REI has also been affected, recently dismissing seven employees due to restructuring in its experiences division, prompted by changes in business strategy. These layoffs are part of a recent pattern at the outdoor retailer.
In earlier actions, REI let go of 357 employees: 200 from its headquarters in Sumner, Washington, 121 from distribution centers, and 36 from various other roles, including the experiences division. This marks the third significant cutback in the past year.
Key Takeaways
- Ongoing Restructuring: REI has laid off a total of 357 employees across various divisions, including headquarters, distribution centers, and the Experiences department. This follows a trend of significant workforce reductions that began in early 2023.
- Financial Struggles: The layoffs are a response to REI’s financial difficulties, including a $164.7 million loss in 2022 and four consecutive quarters of declining sales. Despite a strong sales record, the company faces challenges in the outdoor retail sector.
- Market Downturn: The broader outdoor market, which experienced a boost during the pandemic, is now seeing a slowdown. This shift has led REI to recalibrate its revenue expectations and adjust its cost structure accordingly.
- Future Growth Plans: Despite the layoffs, REI plans to open 10 new stores in 2024 and two more in 2025. The company is balancing cost-cutting measures with strategic investments to ensure long-term growth and sustainability.
REI Faces Financial Struggles and Layoffs Amid Changing Retail Industry
In 2024, REI, the well-known outdoor retailer, faced significant challenges that led to a series of layoffs. These layoffs were part of a broader effort to manage financial difficulties amidst a changing retail environment. REI has recently confirmed a modest number of layoffs, totaling seven positions, continuing a trend of workforce reductions that began last year. Early in the year, REI announced that 357 employees would be laid off, which included 200 from its corporate headquarters, 121 from distribution centers, and 30 from its Experiences department, which organizes classes and outdoor events.
This reduction represented about 2.2% of the company’s workforce. This move followed an earlier layoff in October 2023, where 275 in-store workers were affected, marking an ongoing effort to streamline operations and adjust to market conditions. The company initially cut 167 corporate roles in January 2023, followed by 275 store-based positions in October as part of a restructuring initiative.
The layoffs were largely driven by financial necessity, as stated by REI’s CEO, Eric Artz. He noted that the company had experienced four consecutive quarters of declining sales in the outdoor specialty retail sector, which significantly impacted the business. Although the U.S. economy had managed to avoid a recession, the outdoor retail sector, in particular, was struggling.
CEO Eric Artz has frequently pointed to the necessity of steering REI back to profitability amid challenging economic conditions. The company recorded a $164.7 million loss in 2022, despite achieving a historical high in sales at $3.9 billion.
The broader outdoor market, which saw a surge during the pandemic due to increased interest in activities away from indoor settings, is now experiencing a downturn. For instance, Dick’s Sporting Goods, after acquiring Moosejaw from Walmart in 2023 and closing most of its stores later that year, has reported adverse trends affecting its Moosejaw and Public Lands brands.
Increased participation in outdoor activities during the pandemic temporarily boosted the U.S. market. However, revenue growth has slowed, reverting to the traditionally modest increases typical of the outdoor sector.
A consulting firm has highlighted the importance of innovative growth strategies within the industry, suggesting a shift towards incorporating traditional fashion, expanding customer demographics, and focusing on emotional appeal in marketing rather than solely promoting technical specifications.
The slowdown in this sector caught up with REI in the final quarter of 2023, leading to a recalibration of revenue expectations for 2024. The company expected a decline in revenue for the year and had to adjust its cost structure to manage the downturn effectively. This prompted the strategic decision to lay off employees and restructure certain parts of the business, especially non-store roles such as those in headquarters and distribution centers.
Interestingly, as mentioned, REI’s leadership has emphasized that these layoffs are part of a longer-term strategy to ensure the health and sustainability of the co-op. Eric Artz emphasized that REI is committed to long-term success, noting that the company, as a cooperative, must make tough decisions not just for immediate quarters but with a focus on the future. The restructuring efforts and layoffs are seen as necessary steps to bring the company back to profitability after a challenging period marked by increased promotions and declining sales.
These layoffs did not affect store-specific roles, which suggests that REI is still committed to maintaining its customer-facing retail operations, even as it cuts back in other areas. However, the store operations were not entirely immune to restructuring, as seen in the October 2023 layoffs, which involved the elimination of sales lead roles across all stores. This restructuring was aimed at improving operational efficiency, particularly in terms of scheduling and store management​.
Despite these challenges, REI continues to push forward with its expansion plans. The company announced plans to open 10 new stores in 2024, with two more slated for 2025. This may seem contradictory given the layoffs, but it reflects REI’s strategy to balance cost-cutting measures with investments in growth areas that align with its long-term vision. The company appears to be focusing on areas where it can still find growth opportunities, even as it scales back in other parts of the business​.
In addition to financial struggles, REI has faced internal pressure from its employees, particularly around unionization efforts. Over the past few years, several REI stores have unionized, with employees seeking better representation and working conditions. The layoffs, particularly those affecting non-unionized staff, have intensified calls for stronger worker protections. Union leaders have criticized the layoffs as “ill-conceived” and have called for more respect and accountability from the company toward its employees.
REI’s leadership acknowledges the tough road ahead but remains optimistic that the steps being taken will set the company on a path to long-term health. The focus, according to Artz, is on making strategic decisions that ensure REI can continue to serve its members and customers for years to come. These decisions, while difficult, are seen as necessary to navigate a challenging retail environment and maintain REI’s position as a leader in outdoor retail​.
About REI
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Recreational Equipment, Inc., commonly known as REI Co-op, is headquartered in Washington and is a prominent retailer of outdoor gear and clothing. Lloyd and Mary Anderson established The company in 1938 in Seattle as a cooperative to supply quality outdoor equipment to its members, starting with an imported ice axe for mountaineers. Over the years, REI has expanded significantly and now operates more than 160 stores across the US, providing a broad array of products for various outdoor pursuits like hiking, cycling, camping, climbing, and water sports. Additionally, REI offers expert advice, rents out gear, and coordinates outdoor experiences such as adventure travel and instructional classes.
REI distinguishes itself with a cooperative business structure. As a consumer co-op, members join by paying a one-time fee, earn dividends from purchases, and enjoy exclusive discounts. With over 21 million members, the co-op model is central to REI’s ethos, emphasizing member benefits and community involvement over traditional profit motives.
Committed to sustainability and environmental protection, REI encourages responsible recreation, supports conservation initiatives, and inspires its employees and members to engage with nature, notably by shutting its doors on Black Friday to promote spending time outdoors.
Conclusion
REI’s recent wave of layoffs reflects broader challenges facing the retail industry, particularly in the outdoor sector. The company’s financial struggles, marked by significant losses and declining sales, have prompted a series of workforce reductions aimed at streamlining operations and addressing shifting market conditions. Despite these setbacks, REI remains committed to its long-term vision, balancing necessary cost-cutting measures with strategic investments in growth.
The planned expansion of new stores and ongoing adjustments in business strategy underlines REI’s determination to navigate the current economic landscape while maintaining its core values and cooperative structure. As REI moves forward, its focus on both financial stability and sustainable growth will be crucial in overcoming these challenges and continuing to serve its members and customers effectively.
