Arizona-based Carvana to lay off 2,500 employees as losses mount
Carvana, the fast-growing Tempe-based used-car seller, on Tuesday announced plans to lay off 2,500 employees — more than 10% of its workforce — as losses mount.
The company, which operates a network of Vehicle “vending machines” including one at Loop 202 and Scottsdale Roadsaid the move was intended to “better align staffing and spending levels with sales volumes.”
Carvana posted a loss of $506 million in its first quarter ending March 31, well above Red Ink’s $82 million in the same period of 2021, despite rising 56 % revenue to $3.5 billion and a 14% increase in vehicles sold.
The company has never recorded an annual profit in its 10 years of existence, preferring instead to devote cash flow to expansion.
Impact on Arizona jobs uncertain
The company did not disclose how many of the 2,500 affected employees worked in Arizona or at its headquarters south of Tempe Town Lake. Carvana had approximately 21,000 full-time and part-time employees at the end of 2021.
“All affected team members will have the option to receive four weeks’ pay plus an additional week for each year spent with Carvana,” the company said in a statement. “Affected team members will also have the option of extended medical coverage, salary equal to early vesting of certain previously granted stock awards, recruitment and resume support. and continued participation in certain other company programs.”
Additionally, Carvana executives have pledged to forgo their salary for the remainder of the year to “help contribute to severance pay for departing team members.”
Automotive company at an unusual time
In a letter to shareholders, Ernie Garcia, founder and CEO of Carvana, said the poor first-quarter results reflect a combination of high used-vehicle prices, rising interest rates, coronavirus fallout and… “other macro factors” that have affected Carvana and the occasion – the automotive industry as a whole.
Carvana stock closed Tuesday at $36.68 per share, down from a 52-week high near $377.
Still, Garcia said the company views macroeconomic headwinds as transitory.
“Recent macroeconomic factors have pushed the automotive retail business into recession,” a Carvana spokesperson said in a prepared statement. “While Carvana continues to grow, our growth is slower than we initially expected in 2022, and we have made the difficult decision to reduce the size of some operational teams to better align with current business needs. business.”
Earlier this year, Carvana announced plans to buy ADESA US, a vehicle auction company, for $2.2 billion. The company has not announced any changes to this plan.
Sales below expectations
In a letter to shareholders, Carvana’s management team also cited higher vehicle reconditioning costs and disruptions to its logistics network for the poor quarterly results.
“We typically prepare for sales volume six to 12 months in advance, which means we’ve ramped up capacity across most of our business functions for significantly more volume than we achieved in the first quarter,” the company said. “With our relatively fixed costs in the short term, the decline in retail unit volume has resulted in an increase in the cost of goods sold per unit.”
The company also said it believes the used-vehicle market is stable and will sell an average of 40 million or more units per year. “Long term, our expectations are unchanged and our enthusiasm is higher than ever,” the company added.
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