Yelp ( YELP Quick Quote YELP - Free Report) is reducing its employee strength in an effort to survive amid the coronavirus pandemic. In a letter to employees on Apr 9, Yelp co-founder and CEO Jeremy Stoppelman revealed that the company has decided to lay off 1,000 workers and furlough more than 1,100 staff, representing about 17% of its total workforce.
Yelp provides information through online communities on restaurants, shopping, nightlife, financial, health and other services. However, lockdowns and restrictions to contain the spread of coronavirus are hurting these businesses. This, in turn, is affecting Yelp.
In the letter, Stoppelman noted that its Restaurant category volume has registered a 64% slump since Mar 10. The company’s Nightlife, Gym, and Salon and Other Beauty businesses have tanked 81%, 73%, and 83%, respectively, since Mar 10.
Earlier in March, Yelp withdrew its first-quarter and 2020 financial guidance citing the uncertainty regarding the coronavirus pandemic. During its fourth-quarter 2019 earnings conference call on Feb 13, Yelp had mentioned that it expects 2020 revenues to be up 10-12% year over year and adjusted EBITDA to expand 1-2 percentage points. It had also expected margins to expand again this year.
The Zacks Consensus Estimate for this Zacks Rank #3 (Hold) company’s 2020 revenues is currently pegged at $993.7 million, suggesting a decline of 2% from the prior-year quarter.
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Uncertainty Looms Large
The coronavirus outbreak has not only claimed human lives but is also wreaking havoc on the global economy. It is affecting global trade, investment, tourism and supply chain.
Companies across the globe are facing unprecedented challenges and taking stringent measures to tackle the crisis. Suspension of production, forced leaves/layoffs and cost cutting are becoming commonplace. Despite the policymakers’ best efforts, companies are finding it difficult to stay afloat amid such trying times.
For instance, Sabre Corp. (
SABR Quick Quote SABR - Free Report) last month announced to cut salaries and stop 401(k) contributions for its employees as a result of the challenges faced by the travel industry due to the coronavirus crisis. It also suspended dividend and share repurchases in an effort to preserve cash during these difficult times.
To preserve cash and maintain ample liquidity, U.S. automaker, Ford (
F Quick Quote F - Free Report) , scraped its quarterly dividend payment last week.
In February, Apple (
AAPL Quick Quote AAPL - Free Report) had stated that it doesn’t expect to meet the second-quarter fiscal 2020 revenue guidance issued on Jan 28. The company also mentioned about the disruptions in its global iPhone supply chain due to the impact of coronavirus.
Given the recession that has hit the globe, cash is the king for businesses and investors. Therefore, amid the coronavirus crisis, many companies might be forced to take stringent measures for cash preservation. So, until the fog clears, investors should brace for more layoffs, pay cuts, and dividend and share-buyback suspensions.
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