Falling profits from a shrinking business at Waddell & Reed Financial Inc. triggered job cuts for 10 percent of the Overland Park-based company’s full-time employees.
Waddell & Reed said Tuesday that a falling stock market and customer withdrawals helped push its first-quarter profits down 44 percent. Profits of $37 million equaled 45 cents a share, compared with profits of $67.1 million, or 80 cents a share, a year ago.
The company’s announcement said a lower level of assets under management primarily was responsible for the drop in earnings. Waddell & Reed customers had $95.2 billion in accounts at the end of March, down 9 percent from the start of the year and down 23 percent from the end of March 2015.
Waddell & Reed has seen significant investor withdrawals from its asset strategy and high-yield income funds.
The company had offered a voluntary separation program to employees this spring but turned to layoffs to reach a 10 percent reduction in its full-time employee count. Employees hit by layoffs were told on Friday.
The company did not provide a current employee head count. But at the start of 2016, Waddell & Reed had 1,691 full-time employees, including 1,351 at its Overland Park headquarters.
Cash severance payments will boost the company’s expenses by $14 million to $15 million during the second quarter, which runs from April 1 to June 30. Overall expenses in the quarter will include $16 million to $17 million in charges tied to the cost reduction program that eliminated $43 million in costs each year.
“The entire executive team is focused on positioning the company for renewed growth,” chief executive Hank Herrmann said in the announcement. “Central to our efforts is improving investment performance. I am confident that our investment culture, our proven investment process and the resources we have committed to our investment staff will bear fruit.”
The stock closed Tuesday at $21.53, down $1.75, or 7.52 percent.
Waddell & Reed had surprised investors in February with a 22 percent drop in its fourth-quarter earnings and news that company president Michael Avery would retire at the end of June.