The first quarter of 2022 has not been the best for Carvana. The online used car company is arguably best known for its big car vending machines, but at present it is known to have laid off 12% of its workforce. That equates to 2,500 jobs, and it comes amid a net loss of $506 million in the first quarter of 2022. That hasn’t stopped Carvana from also spending $2.2 billion, which we’ll talk about a bit more. late.
The reason for the net loss? In a letter to investors, the company mentions soaring used car prices with higher interest rates, as well as disruptions in Carvana’s reconditioning and logistics network. Other COVID-19 related issues are also mentioned, although details are not provided. That said, the company reported revenue of $3.49 billion, which is actually 56% increase from the first quarter of 2021. Curiously, Carvana also sold 14% more cars in the first quarter of this year, 105,185 to be exact. However, earnings per car are down $823.
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“The first quarter was a unique environment,” said Carvana CEO Ernie Garcia. “Omicron, high used vehicle prices, rapid changes in interest rates and other macro factors have impacted Carvana and the used vehicle industry as a whole. We consider these macro factors as transitional and remain focused on providing the best possible experiences for our customers.As part of this goal, we are excited to engage ADESA US, which will enable us to deliver even better experiences through an expanded selection, faster delivery times and better value.”
That brings us to the second half of this report, which may seem contradictory for a company that just cut 2,500 jobs. On May 10 – literally the same day – Carvana filed its downsizing notice with the US Securities and Exchange Commission — it announced the acquisition of vehicle auction company ADESA for $2.2 billion (yes, billion). The deal had been in the works for some time, adding 56 US ADESA locations to Carvana’s portfolio.
“Despite the recent industry downturn, Carvana continues to grow and deliver exceptional experiences to a growing number of customers,” Garcia said. “Our goal is to use this alignment of ADESA US to both improve ADESA US physical auction customer experiences and to focus on meaningful and sustainable efficiencies and unit economic improvements. , for Carvana to resume rapid and profitable growth as the industry inevitably rebounds. “
As for the 2,500 people who lost their jobs, Carvana’s SEC filing says there will be an “opportunity” for them to receive four weeks’ pay plus an extra week for each year they’ve been with the company. Extensive health cover is also available, and to help fund severance, Carvana’s management team will waive salaries for the remainder of 2022.