Online used-car retailer Carvana said on Friday it plans to lay off 1,500 employees, or 8% of its workforce, citing economic headwinds and higher financial costs.
While Carvana succeeded during the pandemic when e-commerce boomed and supply chain issues caused more people to buy used cars online, the company’s share price fell. 97% over the past 12 months. Constant inflationrising interest rate and fear of an impending recession have all hurt Carvana’s business.
“Today is a difficult day. The world around us has continued to harden and to do what is best for the business, we must make painful choices to adapt,” the Carvana CEO wrote on Friday. , Ernie Garcia, in an email to employees.
- Carvana will lay off 1,500 employees, or 8% of its workforce
- Carvana stock has fallen 97% in the past 12 months as demand for online retail and used cars declines
Rising borrowing costs and fears of an impending recession dampened demand for used cars, driving prices down. According to the Manheim Used Vehicle Value Index, the price of used vehicles fell for a fifth straight month in October after hitting all-time highs in 2021.
The cuts would be on top of the 2,500 Carvana layoffs announced in May.
“To those affected, I’m sorry,” Garcia said in the email to his employees. “As you all know, we made a decision similar to this in May. It’s fair to wonder why this is happening again, and yet I’m not sure I can answer it as clearly as you deserve.
Many tech companies have struggled over the past year following the heights of the pandemic. Meta Platform Inc., Facebook’s parent company, laid off 13% of its employees earlier this month, while Amazon announced plans to lay off 10,000 employees last week.
Unlike other tech companies, Carvana has also had to deal with the growing decline of the used car industry.
Laid-off Carvana employees will receive severance and severance pay, extended medical coverage for three months and other benefits, the company said.
The massive layoff comes after the company posted weaker-than-expected third-quarter earnings earlier this month. A Morgan Stanley analyst withdrew its rating and said the stock could be worth as little as $1.
Carvana shares fell 6.2% to $7.80 on Friday after the layoffs were announced. The stock has fallen 97% in the past 12 months, far outpacing the 17% drop in the S&P 500 index.