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Short of funds, Urban Ladder axes 40% of its workforce

Omnichannel furniture retailer Urban Ladder has been trimming flab to sustain its operations, but its leadership team claims it is just a couple of months away from turning EBITDA (earnings before interest, tax, depreciation and amortisation) positive.

Industry sources as well as former Urban Ladder employees told BusinessLinethat the start-up let go of 40 per cent of its headcount in the quarter that ended in March.

Elusive profitability

Urban Ladder’s inability to raise more funding and a struggle to turn profitable were the major reasons cited by the management to the employees who were handed pink slips.

The layoffs, which were carried out across levels, functions and geographies, have brought the Ratan Tata-backed company’s headcount down to 700, said the sources, adding that this is the second time that Urban Ladder has resorted to job cuts after 2016.

Asked why the company resorted to a second round of layoffs, Ashish Goel, co-founder and CEO of Urban Ladder, said it was absolutely necessary.

“We had no other option. We would have shut down if we hadn’t asked them to leave,” he said.

Top-level exits

A retail veteran of 30 years, Ajit Joshi, who was hired as President and COO in July 2017, is learnt to have resigned in March citing personal reasons. Other top executives, who were heading various functions, including Operations and Supply Chain, Sales and Marketing, Product, Engineering and HR, have also moved on.

Last year, the company had told BusinessLine it was close to raising $25 million. Goel said it may now no longer require the funds.

Refusing to comment on the number of employees fired, he said: “We have made more than our share of mistakes and have made some tough, painful decisions and gone through a reset from January to March. Now, we are on track to be profitable at the EBITDA level next month and our goal is to deliver ₹8-10 crore of EBITDA this fiscal. It’s not a big number, but it is a start.”

Urban Ladder, which will turn seven next month, doubled its revenue to ₹204.7 crore in FY18 from ₹101.9 crore in FY17. It pared losses from ₹459.1 crore in FY17 to to ₹117.3 crore in FY18, per its RoC filings accessed by paper.vc.

New outlets

The company notched up revenues of ₹345 crore net of cancellations and returns in FY19, Goel said. With 11 stores in Bengaluru and Delhi, offering products ranging from ₹2,000 to ₹1.5 lakh, the start-up plans to open stores in Chennai and Pune in six months.

Urban Ladder’s inability to raise funds from new investors since its last funding round 18 months ago is largely attributed to the new FDI rules in e-commerce, which make potential investors cautious. “With little or no resources to continue with operations till things played out, Urban Ladder was forced to resort to mass layoffs,” said one of the sources.

Tough rivals

The start-up has raised $112.8 million to date, compared to rival Pepperfry, which also turned seven this January and has raised $197.5 million to date. The latter has established over 45 experience stores pan-India.

The entry of Swedish furniture major IKEA, which recently invested in home interiors and renovation platform Livspace, has further toughened competition for Urban Ladder.

On his plans to raise more funds, Goel said: “At some point, we will. We have cash in the bank, we generated ₹1 crore in cash in the business last month and expect to generate cash in the September quarter. On a core operating basis, the cash we have is adequate for us.”

The furniture market in India is worth about $18 billion, of which nearly 90 per cent is unbranded.

Source: The Hindu