© Reuters. FILE PHOTO: The Carvana logo is seen in this photo taken on June 27, 2022. REUTERS/Dado Ruvic/Illustration/File
By Nathan Gomes
(Reuters) – Carvana Co on Friday announced further job cuts that could affect about 1,500 workers, or 8% of its workforce, as it tries to cut costs amid demand for used cars on the back of high interest rates.
The company’s CEO, Ernie Garcia, said in an internal memo obtained by CNBC that the company was facing financial difficulties due to high costs.
Carvana also “failed to accurately predict how this would happen and how it would affect our business,” added CNBC, which first reported the job cuts, citing the memo.
The staff reductions were initiated to accommodate the company’s growth and existing facilities and to meet financial goals, Carvana said in the filing.
The job cuts primarily affect employees in the company’s corporate, technology and operations departments, the company added.
The demand for used cars has been damaged by hybrid models and rising costs caused by rising interest rates, while consumers are also thinking about how to drive to reduce their daily expenses.
Weak demand has forced Carvana to sell more used cars at lower prices than they have acquired at higher prices due to high demand for transportation.
It is now facing a surge in revenue that has led to strong results in the past five quarters, raising investor concerns and sending its shares lower this year.
“Carvana’s restructuring is very much a work in progress,” Baird analyst Colin Sebastian said earlier this month after the company reported higher-than-expected losses.
The Tempe Arizona-based company, best known for its auto dealerships, earlier this year laid off about 2,500 workers, or 12% of its workforce.
Shares of Carvana were almost flat in afternoon trading, having closed up 3% on Friday. They are down about 97% year over year.