Consignment and used car market CarLotz Inc. announced Tuesday evening that it would lay off about a third of its workforce and close stores as it seeks to remain in business.
said it would close 11 of its dealerships, as part of a “strategic review” of its business. Additionally, three locations with existing leases will not open, the company said.
He estimated that the closures will lead to a reduction in the workforce of between 25% and 30%.
Shares of CarLotz rose nearly 4% in Tuesday’s extended session, after ending the regular trading day down 3.8%. CarLotz stock was halted ahead of the announcement. So far this year, the stock has lost 78%, compared to losses of around 21% for the S&P 500 SPX index,
CarLotz last month slashed its outlook for full-year revenue, vehicles sold and gross profit after its profit-sharing corporate vehicle supply partner suspended shipments to the ‘company.
Over the past year, the supply of vehicles has been “contested”, Chief Executive Lev Peker said in a statement.
The pandemic and supply chain rumbles have turned used cars into hot commodities amid continued auto and auto parts shortages that have dampened the supply of new cars.
“Increasing our consumer-sourced vehicle lineup is a priority to complement our retail remarketing supply channel and reduce our reliance on auctions,” he said. “We believe the closures should allow us to improve sourcing on a smaller hub base and focus on the productivity and efficiency of the remaining hubs.”
Decisions that impact employees “are not taken lightly” but are a “necessary step” to help improve the company’s finances, Peker said.
Stores will close immediately, with a full cessation of operations by July 8, the company said.
The closings are expected to reduce CarLotz’s losses to between $12 million and $13 million, plus other savings if leases can be negotiated, the company said.
Stores to close include those in Bakersfield, California, Clearwater, Florida, Mobile, Alabama, and Plano, Texas.
Closing stores would provide about $10 million in additional working capital as inventory in stores is liquidated, CarLotz said. The company estimated expenses with severance packages between $500,000 and $600,000.
In addition to the expected reduction in operating losses going forward, the company estimates hub closures should provide approximately $10 million in additional working capital as inventory is liquidated based on selling prices. provided at these locations. The company estimates one-time non-cash charges of $2-5 million associated with the impairment of lease assets and $5-6 million associated with the impairment of other fixed assets. Other future costs, such as contract termination costs, remain to be determined and will depend in part on ongoing lease negotiations.
The company went public through a deal with a blank check company in January.
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Post expires at 1:38am on Sunday July 3rd, 2022