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, following a freefall in the company’s shares this year and concerns about its long-term trajectory, according to an internal message first obtained by Scott CNBC’s 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 “failed to accurately predict how this would all play out and the impact it would have on our business.”
“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 -mail..
The layoffs come on top of a growing number of tech-focused job cuts amid rising interest rates, inflation and fears of an economic downturn. For Carvana, this also follows rapid growth but some missteps during the coronavirus pandemic to better capitalize on an unprecedented used vehicle market during the coronavirus pandemic.
Shares of the company were down 7% as of midday Friday. Carvana shares have fallen around 97% this year after hitting an all-time intraday high of $376.83 per share on August 10, 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 tech departments, according to the letter. Garcia said all employees in those units would receive emails indicating whether or not they are affected by the cuts.
“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.”
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.
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.
After the third quarter results, Morgan Stanley withdrew its rating and price target for the stock. 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: