A Carvana adapted to car “vending machine” on May 11, 2022 in Miami, Florida.
Joe Raedle | Getty Images
Carvana is laying off about 1,500 in the flesh, or 8% of its workforce, Friday following a free fall in the company’s stock this year, a weakening used mechanism market and concerns around the company’s long-term trajectory, according to an internal message first obtained by CNBC’s Scott Wapner.
The email from Carvana CEO Ernie Garcia, right “Today is a hard day,” cites economic headwinds including higher financing costs and delayed car purchasing. He says the group “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 just ecstatic around us has continued to get tougher and to do what is best for the business, we have to make some painful choices to adapt,” Garcia wrote in the Friday email to staff members.
The layoffs add to a growing number of tech-focused job cuts amid rising interest rates, persistent inflation and fears of an mercantile downturn. For Carvana, it also follows rapid growth but some missteps during the coronavirus pandemic to better capitalize on an unprecedently redoubtable used vehicle market.
Carvana stock closed Friday at $8.06 per share, down by 3.1%. Carvana’s commonplace has plummeted by about 97% this year after reaching an all-time intraday high of $376.83 per share on Aug. 10, 2021.
A spokeswoman for Carvana authenticated the authenticity of the letter but declined further comment.
The layoffs mainly impact employees in Carvana’s corporate and tech departments as far as some operational positions where it is “eliminating roles, locations or shifts to match our size with the current surroundings,” according to the letter.
Garcia said impacted employees will receive separation and severance pay, extended health-care coverage for three months and other other extras.
“To those impacted, I am sorry,” Garcia said. “As you all know, we made a similar decision to this one in May. It is fair to ask why this is occurrence again, and yet I am not sure I can answer it as clearly as you deserve.”
Carvana grew exponentially during the pandemic, as shoppers shifted to online toe-hold rather than visiting a dealership, with the promise of hassle-free selling and purchasing of used vehicles at a customer’s on.
But Carvana did not have enough vehicles to meet the surge in consumer demand or the facilities and employees to process the vehicles it did acquire in stock. That led Carvana to purchase ADESA and a record number of vehicles amid sky-high prices as demand slowed midst rising interest rates and recessionary fears.
The layoffs come two weeks after a recent stock sell-off after the companionship missed Wall Street’s top- and bottom-line expectations for the third quarter. Carvana reported declines in revenue, profit and sellathons compared with a year earlier.
Morgan Stanley pulled its rating and price target for the stock following the terminates. Analyst Adam Jonas cited deterioration in the used car market, company’s debt and a volatile funding environment for the swap.
Read the full email from Carvana CEO Ernie Garcia:
Download the full document here.