A Carvana used automobile “vending machine” on May 11, 2022 in Miami, Florida.
Joe Raedle | Getty Images
Carvana plans to put off about 1,500 people, or 8% of its workforce, following a freefall in the corporate’s stock this yr and concerns around its long-term trajectory, in line with an internal message first obtained by CNBC’s Scott Wapner.
The e-mail from Carvana CEO Ernie Garcia, titled “Today is a tough day,” cites economic headwinds including higher financing costs and delayed automobile purchasing. He says the corporate “didn’t accurately predict how this might all play out and the impact it will have on our business.”
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“Today is a difficult day. The world around us has continued to get tougher and to do what’s best for the business, we have now to make some painful decisions to adapt,” Garcia wrote in the e-mail.
The lay offs add to a growing variety of tech-focused job cuts amid rising rates of interest, inflation and fears of an economic downturn. For Carvana, it also follows rapid growth but some missteps through the coronavirus pandemic to raised capitalize on an unprecedently strong used-vehicle market through the coronavirus pandemic.
Shares of the corporate were down 7% by midday trading Friday. Shares of Carvana have plummeted by about 97% this yr after reaching an all-time intraday high of $376.83 per share on Aug. 10, 2021.
A spokeswoman for Carvana confirmed the authenticity of the letter but declined further comment.
The layoffs mainly impact employees in Carvana’s corporate and tech departments, in line with the letter. Garcia said all employees in those units would receive emails with details about whether or not they are impacted by the cuts or not.
“To those impacted, I’m sorry,” Garcia said. “As you all know, we made the same decision to this one in May. It’s fair to ask why this is going on again, and yet I’m unsure I can answer it as clearly as you deserve.”
The layoffs come two weeks after a recent stock selloff following the corporate missing Wall Street’s top- and bottom-line expectations for the third quarter and reported declines in revenue, profit and sales compared with a yr earlier.
Carvana grew exponentially through the coronavirus pandemic, as shoppers shifted to online purchasing moderately than visiting a dealership, with the promise of hassle-free selling and buying of used vehicles at a customer’s home.
But Carvana didn’t have enough vehicles to satisfy the surge in consumer demand or the facilities and employees to process the vehicles it did have in stock. That led Carvana to buy ADESA and a record variety of vehicles amid sky-high prices as demand slowed amid rising rates of interest and recessionary fears.
Following the third-quarter earnings, Morgan Stanley pulled its rating and price goal for the stock. Analyst Adam Jonas cited deterioration within the used automobile market, company’s debt and a volatile funding environment for the change.
Here’s the total message from Garcia:
