©Health & Fitness Journal. FILE PHOTO: The Carvana logo can be seen in this illustration taken on June 27, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Nathan Gomes
(Health & Fitness Journal) – Carvana Co on Friday announced another round of job cuts that will affect about 1,500 employees, or 8% of the workforce, as the company seeks to cut costs amid slowing demand for used cars due to rising interest rates.
The company’s chief executive, Ernie Garcia, said in an internal memo from Health & Fitness Journal that the company is facing economic headwinds from higher funding costs.
Carvana “also can’t predict exactly how this would all play out and the impact it would have on our business,” added Health & Fitness Journal, which was the first to report the job cuts, citing the memo.
The workforce reductions were initiated to align the company’s size with the current environment and meet financial targets, Carvana said in a regulatory filing.
The job cuts will primarily affect employees in the corporate, technology and operations departments, the company added.
Demand for used cars has been impacted by hybrid working models and higher costs due to rising interest rates as consumers reconsider personal mobility options to reduce their daily expenses.
Weak demand has forced Carvana to sell many used cars at lower prices after acquiring them at a higher cost due to strong passenger transport demand.
The company is now facing mounting spending that has produced dismal results for the past five quarters, raising investor concerns and sending its shares plummeting this year.
“Carvana’s restructuring is a quarterly work-in-progress,” Baird analyst Colin Sebastian commented earlier this month after the company reported a bigger-than-expected loss.
The Tempe, Arizona-based company best known for its automatic car vending machines laid off about 2,500 employees, or 12% of its workforce, earlier this year.
Carvana shares were little changed in evening trade after closing 3% down on Friday. They have fallen by around 97% over the course of the year.