Online used-car retailer Carvana said 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 meant more people were buying used cars online, the company’s stock price has plummeted 97% in the last 12 months. Steady inflation, rising interest rates and fear of a looming recession have all hurt Carvana’s business.
“Today is a difficult day. The world around us has continued to get tougher and to do what is best for the business, we have to make some painful choices to adapt,” Carvana CEO Ernie Garcia wrote in an email to employees Friday.
- Carvana will lay off 1,500 employees, or 8% of its workforce
- Carvana stock has fallen 97% in the last 12 months as demand for online retail and used cars decrease
Rising borrowing costs and worries about a looming recession have dampened demand for used cars, leading to falling prices. According to the Manheim Used Vehicle Value Index, the price of used vehicles fell for a fifth straight month in October after reaching historic highs in 2021.
The cuts would be in addition to Carvana’s 2,500 layoffs announced in May.
“To those impacted, I am sorry,” Garcia said in the email to his employees. “As you all know, we made a similar decision to this one in May. It is fair to ask why this is happening again, and yet I am not sure I can answer it as clearly as you deserve.”
Many technology companies have struggled in the past year after the highs of the pandemic. Meta Platform Inc., the parent of Facebook, fired 13% of its employees earlier this month, while Amazon said it plans to lay off 10,000 employees this past week.
Unlike other technology companies, though, Carvana has also had to face the growing decline of the used car industry.
Fired Carvana employees will receive separation and severance pay, extended healthcare coverage for three months and other benefits, the company said.
The mass layoff comes after the company posted weaker-than-expected third-quarter earnings earlier this month. A Morgan Stanley analyst pulled his rating and said the stock could be worth as little as $1.
Carvana stock fell 6.2% to $7.80 on Friday after the layoffs were announced. The stock has plummeted 97% in the past 12 months, far outstripping a 17% decline in the S&P 500 Index.