A Carvana used car “vending machine” on May 11, 2022 in Miami, Florida.
Joe Raedle | Getty Images
carvana is laying off about 1,500 people, or 8% of its workforce, on Friday following a freefall in the company’s shares this year, a weakening used-vehicle market and concerns about the trajectory ahead. long term of the company, according to an internal message first obtained by CNBC Wapner’s Scott.
Carvana CEO Ernie Garcia’s email titled “Today is a tough day” cites economic headwinds including higher financing costs and delayed car purchases. He says the company “failed to accurately predict how this would all play out and the impact it would have on our business.”
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“Today is a difficult day. The world around us has continued to harden and to do what is best for the company, we must make painful choices to adapt,” Garcia wrote in the e Friday email to employees.
The layoffs come on top of a growing number of tech-focused job cuts amid rising interest rates, lingering inflation and fears of an economic slowdown. For Carvana, it also follows rapid growth but some missteps during the coronavirus pandemic to better capitalize on a used vehicle market of unprecedented strength during the coronavirus pandemic.
Shares of the company were down 5% at midday Friday. Shares of Carvana have fallen around 97% this year after hitting an all-time intraday high of $376.83 per share on Aug. 1. 10, 2021.
A spokeswoman for Carvana confirmed the authenticity of the letter but declined further comment.
The layoffs primarily affect employees in Carvana’s business and technology departments as well as certain operational roles where it is “eliminating roles, locations or changes to match our size with the current environment,” according to the letter.
Garcia said affected employees will receive severance and severance pay, extended medical coverage for three months and other benefits.
“To those affected, I’m sorry,” Garcia said. “As you all know, we made a decision similar to this in May. It’s fair to wonder why it’s happening again, and yet I’m not sure I can answer it as clearly as you deserve.”
Carvana has seen exponential growth during the coronavirus pandemic, as buyers have turned to buying online rather than visiting a dealership, with the promise of hassle-free selling and buying of vehicles used at a customer’s home.
But Carvana didn’t have enough vehicles to meet increased consumer demand or the facilities and employees to process the vehicles it had in stock. This led Carvana to buy ADESA and a record number of vehicles amid exorbitant prices as demand slowed due to rising interest rates and fears of recession.
The layoffs come two weeks after a recent stock sale after the company missed Wall Street expectations for third-quarter revenue and earnings. The company recorded a drop in revenue, profit and sales compared to the previous year.
Morgan Stanley withdrew its rating and price target for the stock after the results. Analyst Adam Jonas cited the deteriorating used-car market, corporate debt and a volatile financing environment for change.
Read the full email from Carvana CEO Ernie Garcia:
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