Loot Crate lays off over a quarter of its staff

LOS ANGELES - In its ascent to becoming the nation's fastest-growing start-up, Loot Crate Inc. fostered a workplace in which employees warred with Nerf guns, proudly brandished Captain America socks and chanted the company's name like a rally cry.

But by last summer, when the Los Angeles business landed on the cover of Inc. magazine for its stupendous expansion, the enthusiasm had been zapped.

Employees gossiped about layoffs, frustration over managers and a dwindling snack bar inside a cramped, windowless warehouse of an office. More recently, two senior executives came an eyelash away from fighting, not with foam darts, but with fists.

CEO Chris Davis now said he may have done the unimaginable: grown the company too fast.

'We bit off a lot and everyone felt that,” Davis said during an interview at the company's merchandise facility. 'Trying to get all these different perspectives, skill sets and levels of experience to work together was probably harder than I expected it to be.”

Between 2012 and 2014, Loot Crate amassed 200,000 subscribers to its $20 monthly shipments of apparel and collectibles related to video games, comics and pop culture. It then launched packages aimed at pet owners, Harry Potter readers, wrestling fans and more.

Subscriptions increased to 650,000, pushing sales to $165 million in 2016, up almost 40 percent compared with the previous year. Over 18 months, the staff nearly doubled to 280.

Davis proceeded despite repeated warnings from subordinates and investors that adding so many new varieties of boxes was financially unsound - more subscribers didn't mean better profit margins.

In February, with investors bearing down, Davis laid off 60 workers and announced a narrowed focus that favors squeezing out profit over adding subscribers. During the course of the winter, the company cut about 27 percent of its workforce and lost its chief financial officer, senior vice presidents of technology and brand management, vice president of procurement and directors of product and growth.

Loot Crate has breezed through $18.5 million in venture capital raised a year ago. And it's beset with more than $20 million in excess inventory that's difficult to pawn off. The financial hole, along with a soured culture, has left doubts among past and current staffers whether Davis can lead a rebound.