Carvana Co. shares rallied in after-hours trading on Wednesday after the used-car dealership admitted both industry-wide and company-specific issues impacted its first-quarter business, but said it had plans to address its challenges.
Carvana CVNA, -9.11%, noted in its letter to shareholders that the Omicron variant and used car prices were among the factors impacting the broader industry during the quarter, while the company also grappled with some issues of its own in relation to “logistics network overhaul and disruptions.”
“We generally prepare for sales volume 6 to 12 months in advance, which means we have built capacity across most of our business functions for significantly more volume than we fulfilled in the first quarter,” the company said in its letter . “Because our costs were relatively fixed in the short term, lower retail unit volume resulted in a higher cost of goods sold per unit.”
Carvana is trying to manage its challenges, Chief Executive Ernie Garcia III said on the company’s conference call. The company’s “logistics team has clear plans in several key areas” to bring its metrics back to where they were and then “go significantly beyond that,” he told investors. In addition, Carvana intends to expand its range of more affordable vehicles.
Shares fell as much as 25.7% earlier in after-hours trading on Wednesday, according to Dow Jones Market Data, but they rebounded to end the extended session up 4.6%. They were down about 9% in Wednesday’s regular session.
Carvana posted a net loss of $506 million last quarter, compared to a loss of $82 million a year earlier. It reported a net loss of $260 million attributable to the company, while the year before it posted a loss of $36 million on the same metric.
Carvana lost $2.89 a share for the quarter compared to 46 cents a year ago. The FactSet consensus was for a loss of $1.58 per share.
Revenue rose to $3.5 billion from $2.2 billion, while analysts tracked by FactSet had put the figure at $3.4 billion.
“Although we faced a uniquely challenging environment in the first quarter, we are already seeing positive trends in our key metrics,” the company said in its shareholder letter.
Due to “current industry trends affecting customer affordability, high used car prices, rapid interest rate moves, rapid increases in fuel prices and other macroeconomic uncertainties affecting the used car market,” Carvana said it would not be providing “specific” numerics short-term forecast” for the remainder of 2022.
Carvana was blunt in its shareholder letter, acknowledging that the quarter was “challenging” but noting that the company also sees an “opportunity” to improve the business, in part due to “weaknesses” uncovered in the current environment became.
“While the quarter undoubtedly marked a step backwards in our financial results, we will work hard to make it a mark of an even bigger step forward in achieving our goal of becoming the largest and most profitable auto dealership,” the letter reads .
Separately, the company announced that it intends to offer a new series of $1 billion of perpetual preferred stock and $1 billion of Class A common stock. Ernest Garcia II and Chief Executive Ernie Garcia III, along with companies they control, have expressed interest in purchasing up to $432 million of Class A common stock, the company said in a press release.