GoPro Inc. announced Wednesday plans to lay off more than 20% of its remaining staff and cut out retailers from its sales as revenue reels from the spread of COVID-19.
GoPro GPRO, -13.63% has already conducted multiple rounds of layoffs that have trimmed its workforce from more than 1,500 at the end of 2016 to fewer than 1,000 workers in recent years. In a news release Wednesday afternoon, the company said it plans to lay off more than 200 employees as part of a plan to save $100 million in operating expenses this year and $250 million in 2021; GoPro ended 2019 with 926 employees, according to an earlier filing with the Securities and Exchange Commission.
“GoPro’s global distribution network has been negatively impacted by the COVID-19 pandemic, driving us to transition into a more efficient and profitable direct-to-consumer-centric business over the course of this year,” Chief Executive Nicholas Woodman said in the release. “We are crushed that this forces us to let go of many talented members of our team, and we are forever grateful for their contributions.”
Part of GoPro’s plan is to cut out many retailers and attempt to sell its cameras direct to consumers, with some exceptions for “leading retailers in key regions where consumers prefer to purchase offline or indirectly.” The company said that more than 20% of 2019 sales in Europe and nearly 20% of U.S. revenue came from sales on its website.
GoPro provided preliminary first-quarter results that show why it is taking drastic steps. Sales in the first quarter fell by more than half from the same quarter a year ago, with GoPro revealing revenue of about $119 million after sales of $243 million in the first quarter of 2019. The company had projected sales of $140 million to $160 million, so the total is 15% below the low end of that guidance. Analysts on average expected sales of $148 million, according to FactSet.
GoPro expects losses in the middle of its projected range of 30 cents to 40 cents a share, while analysts on average expected losses of 31 cents a share, according to FactSet. The company disclosed that about 700,000 cameras were sold to consumers in the first quarter, and that it has $125 million in cash and equivalents remaining.
Business could get worse for GoPro as two of its main use cases — travel and adventure sports — are largely shut down while the COVID-19 pandemic forces many to stay at home, Oppenheimer analyst Andrew Uerkwitz noted recently. Consumer spending is expected to swivel toward electronic goods needed to work or entertain oneself while at home.
Woodman agreed to forego the remainder of his salary for the rest of 2020, and the board of directors also will waive all cash compensation this year. Woodman refused to take a salary or bonus in 2018 after a large round of layoffs at the beginning of the year, but his $800,000 salary was reinstated for 2019.
GoPro expects the restructuring — which also involves reducing office space and marketing spending — will result in aggregate charges of $31 million to $49 million, much of which will be reflected in second-quarter earnings. The company expects to fully report first-quarter results in May, though it did not set a firm date.
GoPro shares ticked about 0.4% higher in after-hours trading Wednesday following the announcement, after closing with a 13.6% plunge to $2.66 in the regular session. GoPro stock has declined 38.7% so far in 2020 as the S&P 500 index SPX, -2.20% has dropped 11.9%, and the company — which was valued at more than $12 billion not long after its 2014 initial public offering — is now worth about $415 million in total.