A Carvana used car ‘vending machine’ on May 11, 2022 in Miami, Florida.
Joe Raedle | Getty Images
Carvana is laying off about 1,500 employees, or 8% of its workforce, on Friday following a free fall in the company’s stock this year, a flagging used-car market and concerns about the company’s long-term future, according to an internal message first obtained by CNBC’s Scott Wapner.
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 “wasn’t able 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 only gotten tougher and to do what is best for the business, we must make some painful adjustment decisions,” Garcia wrote to employees in Friday’s email.
The layoffs add to a growing tide of tech job layoffs amid rising interest rates, persistent inflation and fears of an economic downturn. For Carvana, it also follows rapid growth but some missteps during the coronavirus pandemic to better capitalize on an unprecedentedly strong used car market.
Carvana shares closed at $8.06 a share on Friday, down 3.1%. Carvana’s stock is down about 97% this year after hitting an all-time high of $376.83 per share on Aug. 31. 10th, 2021.
A spokeswoman for Carvana confirmed the authenticity of the letter but declined further comment.
The layoffs primarily affect employees in Carvana’s corporate and technology departments, as well as some operational positions where “roles, locations or shifts will be eliminated to align our size with the current environment,” the letter reads.
Garcia said affected employees would receive severance and severance payments, three months of expanded health insurance and other other benefits.
“I’m sorry for those affected,” Garcia said. “As you all know, we made a decision similar to this one in May.
Carvana grew exponentially during the pandemic as buyers switched to buying online rather than visiting a dealership, with promises of hassle-free used vehicle sales and purchases at customers’ homes.
But Carvana didn’t have enough vehicles to meet the surge in consumer demand, or the facilities and staff to process the vehicles it stocked. This prompted Carvana to buy ADESA and a record number of vehicles at sky-high prices as demand slacked amid rising interest rates and recession fears.
The layoffs come two weeks after a recent stock sale after the company missed Wall Street’s sales expectations for the third quarter. Carvana reported year-over-year declines in revenue, profit and sales.
Morgan Stanley withdrew its rating and target price on the stock following the results. Analyst Adam Jonas cited the deteriorating used car market, the company’s debt and a volatile funding environment for the switch.
Read the full email from Carvana CEO Ernie Garcia:
Download the full document here.