Care.com Needs a New Governess

Even

Care.com

is on the hunt for a trusted head of household.

On Tuesday, the online care giant kicked off its second-quarter earnings call for investors by announcing its founder and chief executive, Sheila Lirio Marcelo, would step down and move to a new role as executive chairwoman. Ms. Marcelo’s move comes less than two months after the company said in a regulatory filing that Chief Financial Officer Michael Echenberg would resign.

The quarterly results themselves were largely disappointing. Sales were slightly below Wall Street’s estimates and the company reported a significant net loss largely due to one-time charges. The outlook for full-year sales and earnings per share were lowered, driven by weakness in its U.S. consumer business. Investors sent the stock down more than 20% in early trading on Tuesday.

Care.com has been working to bolster trust in its U.S. consumer platform, adding in-depth background checks and a Social Security verification process for caregivers on its platform. The investments come after a Wall Street Journal investigation in March revealed hundreds of instances of day-care centers listed on Care.com as licensed that didn’t appear to be. It also found instances in which caregivers on its platform had police records and later were accused of committing crimes while caring for customers’ children.

Sheila Lirio Marcelo, founder and chief executive officer of Care.com, on May 1, 2018. Ms. Marcelo is moving to a new role as executive chairwoman.


Photo:

Dania Maxwell/Bloomberg News

Negative publicity is affecting Care.com’s paying member growth, which has historically relied heavily on word of mouth among parents. An unexpected traffic mix shift to mobile and smaller-than-expected conversion from product improvements in the quarter were also cited as contributing factors to softness in paid growth. It seems there is still more work to be done.

One bright spot in the quarter was Care.com’s employer program Care@Work, which already provided in-depth screening of caregivers for its enterprise partners. Despite concern among some analysts that recent news could negatively impact enterprise clients, the company said key clients renewed contracts in the quarter. Although that segment’s sales grew 47% year-over-year, it was less than 12% of Care.com’s overall business.

Care.com’s stock is now down more than 57% over the past six months. On Tuesday, Ms. Marcelo said the company would “turn the page to a new chapter…into a new phase of growth.” Given recent results, it is likely the next stage could emphasize the company’s growing Care@Work platform, where it employs its own caregivers, while it works to rejuvenate its U.S. matching business.

Care.com will need more than one spoonful of sugar to help the medicine go down, it seems.

Write to Laura Forman at laura.forman@wsj.com

Corrections & Amplifications
Care.com’s shares fell more than 20% in early trading on Tuesday. An earlier version of this article incorrectly gave the day as Wednesday. (Aug. 6, 2019)

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