In an effort to reduce spending, U.S. ride-hailing platform Lyft (LYFT-US) said on Wednesday (20th) it would cut about 2% of its workforce and shut down its car rental service.
Lyft has about 4,600 employees. Lyft has laid off about 60 employees in its rental division and is also ending its rental car service. “We’ve made the decision to end Lyft’s first-party rental car service and will focus on car rentals with partners like Sixt and Hertz,” said Lyft spokesperson Jodi Seth.
Seth has previously said that Lyft will focus on accelerating profitable growth, prioritizing the businesses that contribute the most to the company, while also taking responsibility for costs.
Lyft said in May that it would slow hiring and cut some departmental budgets. Given the slow pace of the recovery, Lyft will significantly slow hiring in the U.S. and focus on key roles, such as its core ride-hailing business, said Lyft co-founder and president John Zimmer. In addition, Lyft will issue stock options to eligible employees.
Ride-sharing stocks have had a poor year, with Lyft shares down about 67% so far this year. Despite the impressive rebound in rides in the post-pandemic era, the pace of growth has slowed from pre-pandemic levels.
Lyft Chief Financial Officer Elaine Paul said in previous earnings reports that the company hopes to continue to improve service levels and prepare for future growth plans, announcing to expand investment spending on driver subsidies from next quarter, but also warned that these costs will be higher. The price is passed on to consumers and affects the profitability of the company.
Needham analyst Bernie McTernan maintained a “continue” rating on Lyft, mainly because of concerns about the company’s cost of hiring enough drivers, but he raised his forecast for the company, raising its revenue estimate for this year by 1 %, up 5% next year, putting its model well above Wall Street consensus.