Dive Brief:

• REI is exiting its experiences business effective this week and cutting hundreds of jobs as a result, the outdoor retailer said in an announcement Wednesday. The experiences division includes REI’s adventure travel, day tours and classes.
• Layoffs will impact 180 full-time and 248 part-time employees, while some workers who split time between divisions may be able to take on a different role. Full-time employees will receive benefits and their salary into March, as well as severance, COBRA and outplacement services. Part-time employees will receive benefits through January, along with severance.
• In a message shared with employees, REI CEO Eric Artz presented the decision as a financial one, noting that the experiences arm of the business “costs significantly more to run than it brings in.” Artz added that running a co-op “requires a sustainable economic model that is capable of investing at the appropriate level to fully fund our most critical strategic ambitions.”

Dive Insight:

REI’s search for renewed profitability is once again leading to job cuts.

The latest in a string of layoffs at the outdoors retailer, REI is cutting more than 400 positions in its search for stronger financial footing. The retailer laid off more than 350 people last January, which was its third round of layoffs in less than a year, and cut another seven people in August as it reorganized its experience division.

Now, the experience division is being dissolved entirely after more than 40 years of operations. While Artz expressed gratitude for the work of REI’s experiences employees, saying they did “nothing wrong” and have “worked extremely hard,” he said the business simply didn’t make sense to run financially and only reached 0.4% of the retailer’s customers last year.

“When we look at the all-up costs of running this business, including costs like marketing and technology, we are losing millions of dollars every year and subsidizing Experiences with profits from other parts of the business,” Artz said. “Even at our peak in 2019 — our best year for Experiences ever — we did not generate a profit.”

Although REI is shuttering the business for now, Artz said he believes the retailer has a place in education and local communities in the future and is funding a small team to explore other options for classes in 2025. The company’s local marketing teams will also be reincorporated into the larger organization.

“We’ve held out as long as possible, but the fact remains that Experiences is an unprofitable business for the co-op, and we must adjust course,” Artz said. “Every path to profitability we explored would have required us to invest more time, effort and focus away from parts of the business that reach significantly more customers, drive more positive financial outcomes, and have greater impact on our mission to get people outside.”

Although REI is a private company, and therefore not required to report financials, the retailer announced in 2023 that it swung to a loss in 2022 — and Artz has repeatedly stressed the importance of returning to profitability since then. Although 2024 results haven’t been finalized, Artz said the retailer will be close to breaking even in terms of pre-dividend operating income and free cash flow. The retailer is still focused on expansion in some areas, including plans to open new stores. REI hired a new chief marketer in November and around the same time instituted a new return policy to stop serial offenders from misusing its policy.