Used-car consignment and marketplace CarLotz Inc. said late Tuesday it will lay off about a third of its workforce and close stores as it seeks to remain in business.
said it would close 11 of its dealerships, as part of a “strategic review” of its business. In addition, three locations with existing leases won’t open, the company said.
It estimated that the closures will result in a workforce reduction of between 25% and 30%.
Shares of CarLotz rose nearly 4% in the extended session Tuesday, after ending the regular trading day down 3.8%. CarLotz stock was halted before the announcement. So far this year, the stock has lost 78%, compared with losses of around 21% for the S&P 500 index
CarLotz last month slashed its full-year outlook for revenue, vehicles sold and gross profit, after its profit-sharing corporate vehicle-sourcing partner paused consignments to the company.
In the past year, vehicle sourcing has been “challenged,” Chief Executive Lev Peker said in a statement.
The pandemic and supply-chain snarls have turned used cars into hot commodities amid ongoing auto and auto-parts shortages that curbed the supply of new cars.
“Growing our mix of consumer-sourced vehicles is a priority to complement our retail remarketing sourcing channel and reduce our reliance on auctions,” he said. “We believe the closures should allow us to improve sourcing across a smaller hub base and focus on the productivity and efficiency of the remaining hubs.”
Decisions impacting employees “are not taken lightly,” but are a “necessary step” to help improve the company’s finances, Peker said.
Stores will close immediately, with a complete winding down of activities by July 8, the company said.
The closures are expected to cut down CarLotz’s losses by between $12 million and $13 million, plus more savings if leases could be negotiated, the company said.
Stores to be closed include those in Bakersfield, Calif., Clearwater, Fla., Mobile, Ala., and Plano, Texas.
Closing the stores would provide about $10 million in additional working capital, as inventory in the locations are liquidated, CarLotz said. The company estimated expenses with severance costs of between $500,000 and $600,000.
In addition to the anticipated reduction in losses from operations going forward, the company believes the hub closures should provide additional working capital of approximately $10 million, as inventory is liquidated based on anticipated sale prices at these locations. The company estimates one-time non-cash charges of $2 million to $5 million associated with the impairment of lease assets and $5 million to $6 million associated with the impairment of other fixed assets. Other future costs, such as contract termination costs, are yet to be determined and will be dependent in part on current lease negotiations.
The company went public through a deal with a blank-check company in January.