Pinterest (PINS) Initiates Restructuring Plan to Trim Costs
Pinterest, Inc. PINS recently disclosed definite plans to reduce operating costs as it aims to mitigate risks amid a challenging macroeconomic environment. The strategic move is part of a focused restructuring initiative to improve its margins for sustainable business practices in the wake of cut-throat competition from established players in the market.
The company has decided not to renew the leases of certain office spaces and expects to significantly reduce its recurring costs by the end of 2023. The office space reduction is in concurrence with the contraction in the workforce that it had initiated last month. Pinterest reportedly slashed its workforce by about 150 employees out of a total of 4,000 by the end of December 2022. The company anticipates incurring $100 million to $125 million charges related to the restructuring plan.
The restructuring plan is likely to offset higher operating expenses for expanding operations domestically and internationally, enhancing product offerings, broadening Pinner and advertiser base, expanding marketing channels and developing technology. In fourth-quarter 2022, total costs and expenses increased 31% year over year $871.3 million. While cost of sales and marketing surged 66% to $317.3 million, research and development expenses rose to $265.2 million from $240.8 million in the year-ago quarter. The increase was largely driven by ongoing investments in innovation, including mobile deep linking, entire page optimization, and improved measurement tools and stronger brand marketing campaign.
However, Pinterest is increasingly establishing a unique value proposition to advertisers that could provide a competitive advantage in the long haul. It continues to dramatically improve the advertising platform, which presently appears to be one of the best ad platforms for consumer discretionary brands looking for new ways to reach customers and stretch smaller ad budgets. Pinterest’s Verified Merchants Program allows brands to create a catalog of shoppable products on the app and use special re-targeting capabilities in their ads.
The acquisition of the AI-powered, high-tech fashion-shopping platform, The Yes, has further enabled it to steer the evolution of its features and merchants. Pinterest and The Yes share a common vision of making it easy for customers to find products matching their tastes and style. The company has been making continuous efforts to absorb creators’ publishing videos and live streams to make the shopping experience swift and easy for customers.
The stock has gained 5.3% in the past year against the industry’s decline of 32.5%.
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Pinterest currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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