Carvana Co. said it plans to complete a $1 billion reduction in operating costs by the second quarter of 2023 as the online car-sales company seeks to right itself without resorting to layoffs, after it snapped a streak of winning years in 2022.
shares fluctuated between slight gains and losses after hours, following a 0.1% gain in the regular session to close at $10.08.
“We expect these expense reductions to be broad-based across all large SG&A expense components, but importantly, we do not expect a reduction-in-force to be part of this plan,” Carvana said in a statement.
“We came into the year positioned for growth, similar to what we had experienced in our prior nine years,” the company told shareholders in a letter. “After the pandemic, snarled automotive supply chains and historically rapidly rising interest rates combined to dramatically impact the affordability of used cars.”
“Rising interest rates and market sentiment drove a significant shift in our priorities away from growth and toward profitability,” Carvana said. “This led to markedly lower volumes than we had positioned for and, as a result, we have been carrying excess costs.”
The company reported a fourth-quarter loss of $806 million, or $7.61 a share, compared with a loss of $89 million, or $1.02 a share, in the year-ago period.
Carvana reported total revenue fell to $2.83 billion from $3.75 billion in the year-ago quarter, as retail sales fell 23% to 86,977 units.
Analysts surveyed by FactSet had forecast a loss of $2.18 a share on revenue of $3.06 billion.
“We currently expect a sequential reduction in retail units sold in Q1 2023 compared to Q4 2022, as we continue to normalize our inventory size, optimize marketing spend, and make progress on our profitability initiatives,” the company said.
Carvana shares have jumped 112% year to date, but are still down 92% over the past 12 months.