(Bloomberg) — Ride-hailing company Lyft Inc. plans to cut at least 1,200 jobs in a fresh round of layoffs as the company struggles to reach profitability and compete with bigger rival Uber Technologies Inc.
The latest reductions could affect 30% or more of Lyft’s 4,000 employees, according to a person familiar with the matter, and come after the company already shed some 700 people last year.
The Wall Street Journal earlier reported the cuts, adding that they could help Lyft slash 50% of its costs.
The restructuring is one of the first moves by new Chief Executive Officer David Risher, who was appointed last month to replace co-founder Logan Green, who, along with co-founder and current President John Zimmer, are stepping back from daily operations after more than a decade with the company. Risher started his new job this week.
In a letter to staff on Friday, Risher confirmed that the company will “significantly reduce the size of the team as part of a restructuring to focus on better meeting the needs of riders and drivers.” All Lyft offices will be closed on April 27 as employees learn of their status.
Founded in 2012, three years after its hometown rival, San Francisco-based Lyft has increasingly been marginalized by Uber, which accounted for 75% of the US consumer ride-share sales at the end of February, while Lyft had 25%, according to Bloomberg Second Measure.
Uber has benefited from expanding into food and beverage delivery, which helped it thrive during the pandemic when demand for shared rides plummeted. Lyft meanwhile, has been slow to recover from the pandemic, and the driver shortage caused high prices and long wait times for customers. On a per-mile basis, Lyft fares are about 31% higher compared with 2019 while Uber’s are 20% higher, according to YipitData.
“We need to be a faster, flatter company,” Risher said. “And we need to bring our costs down to deliver affordable rides, compelling earnings for drivers, and profitable growth.”
Even with the cost-savings that the job cuts could yield, investors’ confidence in Lyft’s ability to compete with Uber is waning. “Everyone is expecting them to sell the company,” said Bloomberg Intelligence analyst Mandeep Singh. “In this environment, the chances Lyft — which is a distant second player in ride-share — to turn things around are pretty bleak,” Singh said.
In February, Lyft forecast dramatically lower profits than Wall Street had expected, projecting adjusted earnings before interest, tax, depreciation and amortization of $5 million to $15 million this quarter, missing an $83.6 million average estimate in a Bloomberg survey. Its shares tumbled 36% on the day, prompting speculation among some analysts that it could be up for sale. Risher, in an interview at the time, denied the company might be headed for the auction block and said, instead, that he would use lower fares to compete with Uber.
Lyft’s shares jumped 5.5% after news of the restructuring before paring some of those gains. They are down almost 10% this year while Uber is up 21%.
(Updates with analyst commentary in ninth paragraph.)