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Carvana Q1 net loss more than doubles as virus slows demand

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Carvana reported a larger first-quarter loss as the online used-vehicle retailer, which has not posted a profit as a public company, was hit by the coronavirus pandemic.

The company said demand began to fall in mid-March as state and local governments implemented shelter-in-place orders.

“This slowdown persisted into April with weekly retail unit sales down approximately 30 percent year-over-year early in the month,” the company said in a letter to shareholders Wednesday. “In recent weeks, sales have rebounded to approximately 20-30 percent growth year-over-year, significantly outperforming the industry.”

Carvana reported a net loss of $183.6 million for the quarter, compared with a loss of $82.6 million in the year-ago period.

The company’s total gross profit per unit was $2,640, up from $2,408 in the year-ago quarter, but down from $2,850 in the fourth quarter of 2019.

Even with lower demand at the end of the first quarter, Carvana, which has reported several periods of triple-digit top-line and unit growth, said revenue rose 45 percent to $1.09 billion during the latest period. Retail unit sales grew 43 percent to 52,427.

Carvana withdrew earnings guidance for the full year on March 30 and did not provide an updated outlook with Wednesday’s results.

In the first quarter, the company continued to aggressively buy cars and light trucks from customers, with a 157 percent increase in acquisitions. It bought 72 percent as many vehicles from customers as it sold, up from 40 percent in the year-ago period. It had suspended purchases from customers at the onset of the COVID-19 crisis but has since selectively been acquiring them again.

Before the onset of the crisis in mid-March, Carvana launched in 15 new markets and erected one new vending machine in the quarter. It was in 161 markets at quarter-end, covering 68.7 percent of the U.S. population, and had 24 vending machines.

Carvana sees its approach to used-vehicle sales especially relevant to customers during the pandemic, and said it expects to open in “many smaller markets” that can be served from its current logistics network with limited investment. That will bring its U.S. market coverage to 73 percent of the population in the near term.

It has otherwise but a freeze on entering new markets, as well as building new vending machines, to save on capital expenditures during the outbreak.

Carvana said it has also “significantly reduced discretionary growth expenditures on new hiring, travel, facilities, and IT investments,” “rebalanced” marketing, staffing and purchasing levels to meet demand, and “substantially” reduced working hours for operations and customer care teams.

Carvana shares fell 8.9 percent to $83 in after-hours trading Wednesday.

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