Pandemic Forces Sonos to Slash 12% of Global Workforce, Close New York Store
Sonos is eliminating 12% of its global workforce as part of a plan to cut operating expenses and preserve liquidity, said a Wednesday SEC filing. It didn't respond to questions on which departments would be affected. It's also closing its New York retail store, which opened in 2016 (see 1607190049), and six satellite offices. The store in Manhattan's SoHo neighborhood was reportedly damaged during the violence associated with the Black Lives Matter protests.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
“When the pandemic hit, we took immediate action to review our investments for the year and made changes to reduce operating expenses and preserve liquidity," said CEO Patrick Spence in a statement. "The pandemic and resulting economic impacts have caused us to have to make some hard choices, including reductions to our workforce, and the closure of some of our smaller offices and our storefront in New York City. These changes are necessary in order for us to emerge from this period ready to take advantage of opportunities we see in the future."
The Sonos board approved Tuesday a 20% cut to Spence’s base salary, July 1-Dec. 31. All board members agreed to forgo their annual cash retainers for the same period.
A shareholder letter accompanying Q2 FY ’20 (ended March 28) financial results in May referenced “uncertainty and challenges stemming from the COVID-19 pandemic” (see 2005070025), and actions Sonos was taking to reduce marketing investments, tighten inventory and eliminate certain operating expenses.
In connection with layoffs and site closures, Sonos will incur about $25 million-$30 million in restructuring and related impairment charges, including $9 million-$11 million for employee severance and benefit expenses and $16 million-$19 million for site closures and other charges, it said. Most costs are expected to be incurred in fiscal Q3. Of the total restructuring charges, $9 million-$11 million is expected to result in future cash expenditures, it said.
These actions are “solely related to the Company’s previously disclosed initiative to reduce operating expenses and preserve liquidity in the face of the pandemic and are not reflective of any material changes in the Company's business since it reported second quarter fiscal 2020 results,” it said.
Last year, Sonos disclosed it was moving some manufacturing to Malaysia to mitigate the impact of Section 301 tariffs. Chief Financial Officer Brittany Bagley told an investor conference in March (see 2003050056) the company was watching the coronavirus impact closely, having manufacturing facilities in China that were coming back on line. Bagley said then the company expected to have most U.S.-bound production in Malaysia by year’s end.
Malaysia saw a manufacturing slowdown in late Q1 and Q2 with factories shut down during the pandemic (see 2005290042). Sonos didn’t respond to questions on how those disruptions have affected production or the progress of the transition.
A Monday report suggesting Apple might buy the wireless multiroom audio company, sent the Sonos stock soaring 18% that day to $14.06. The companies didn't comment on the reports. Sonos shares closed 2.3% lower Wednesday at $13.77.