Gone in a Flash

Gilt Groupe cut staffers within its Gilt City division and will be focusing on key markets like New York, and closing offices in secondary markets like Atlanta.

Image: Gilt.com

Is the glitz coming off the flash-sales business?

Gilt Groupe, a luxury e-commerce and flash-sales site that has been moving towards going public, confirmed that it has trimmed roughly 10 percent of its employees, including some of its management team for its daily deal operation, Gilt City. Gilt’s daily deal division was reportedly the hardest hit by the cuts. Rumors of layoffs at the New York-based startup, which employs 900, had surfaced last month and apparently came to fruition on Friday.

In a statement today, the company says that the layoffs, which included 80 to 90 staffers, have been completed and that it will be doing a partial retreat from three of the four markets Gilt City entered over the summer.

“Regarding Gilt City, that business has developed a clear market position and terrific offerings in our core cities, with [New York, Los Angeles, San Francisco, Chicago, Boston, Washington, D.C., and Miami] all showing growth over the last year,” the statement said. “We have not been as successful in smaller markets, and the resources they require take away from growing our core business. Effective immediately we will be closing the offices in our secondary cities (San Diego, Houston, Philadelphia, Seattle, Dallas, and Atlanta) and servicing those smaller markets through a centralized sales force.”

The company’s CEO Kevin Ryan told AllThingsD that the cuts are designed to get the company to cash-flow positive by the second quarter and profitable by the fourth quarter.

The company, which had raised $138 million in capital last May, remains on track for an initial public offering, perhaps as early as the fourth quarter, but more likely in 2013, Ryan said.

Two key executives were let go as part of the restructuring. John Auerbach, who headed up Park & Bond, the men’s full-priced apparel site, and Nathan Richardson, who ran Gilt City, will both be leaving after a transition period. Both verticals are continuing, and Ryan said both men are exiting because they are better suited for running startups and that he would be “their No. 1 reference.”

Ryan said he anticipates a lot of consolidation in the daily deal space going forward, but that deals remain a profitable business for the company in certain regions such as New York, which is Gilt City's most profitable division.

“I think you’ll end up with a smaller group of companies. There will be a couple of high-end players, like ourselves and Bloomspot, and then there will be a couple of verticals, like restaurants or kids, and that’s it,” he told AllThingsD.

Another casualty of the Gilt cuts, according to New York magazine, is a stocked refrigerator at headquarters including daily supplies of fruits, yogurt, cheeses, Pop Tarts, and Pellegrino. A note went up on the fridge signifying those changes at the beginning of the year.