Carvana
reported a first-quarter loss of $1.51 a share, narrower than the loss of $2.89 a share in the same quarter a year earlier, as the company said its cost-cutting campaign will contribute to positive earnings, excluding some expenses, for the quarter that’s currently under way.
Shares rose 27% in after-hours trading Thursday.
Revenue dropped 25%, to $2.6 billion, Carvana said in a letter to shareholders Thursday. The consensus of analysts tracked by
FactSet
was a quarterly loss of $2.03 a share on revenue of $2.64 billion. The retailer sold 79,240 vehicles in the quarter, a 25% decline from 2022.
Carvana attributed the revenue and unit-sale declines in part to an “prioritization of profitability initiatives.” The company reached its target of reducing its quarterly sales, general and administrative expenses by more than $100 million earlier than anticipated, it told shareholders.
“The last year has been a tough year,” Carvana chief executive Ernest Garcia III said during a conference call with analysts later Thursday. “I hope you see this quarter as evidence that it is paying off and it is paying off very quickly.”
Carvana also said that its adjusted earnings before interest, taxes, depreciation and amortization will be positive in the second quarter. It recorded a $24 million loss by that measure during the first quarter of 2023, and a $348 billion loss a year earlier.
Carvana’s shares are down 88% over the past 12 months, but up 56% so far this year.
Carvana, founded in 2012, has been on a downswing since early 2022, when its breakneck pandemic-era growth faltered amid rising inflation and the end of government stimulus checks that had helped support many car purchases.
Analysts including Seth Basham at Wedbush Securities have portrayed Carvana as struggling to generate enough cash to service the debt it took on during its years of rapid growth.
Carvana’s main creditors have proposed a deal that includes exchanging some of the debt they hold for equity in the company to improve its liquidity, according to a report last month from Bloomberg News. Garcia didn’t directly respond to an analyst question about the proposal on Thursday.
Basham said in a research note Monday that Garcia and his father, Ernest Garcia II, who is Carvana’s chairman and largest shareholder, were unlikely to accept the proposal because of additional provisions that include requiring them to add new capital to the business.
Write to Jacob Adelman at [email protected]
Read the full article here
