Online used car retailer Carvana reported “milestone” first quarter (Q1) results on Wednesday (May 1), fueling a 30% surge in its stock price. This strong performance comes on the heels of a challenging period in 2022, during which Carvana shares plummeting by 97%.
“We not only set new all-time company records [this quarter], but we also became the most profitable public automotive retailer in the U.S. for the first time,” Carvana CEO Ernie Garcia told investors and analysts on a call accompanying its results.
Garcia added: “The last few years have resoundingly proven just how difficult it is to build a business this complex, to drive it to scale [and] achieve strong unit economics and to deliver high quality customer experiences. Building a business like Carvana is very hard, and hard is the ultimate competitive mode.”
In terms of key metrics, the Arizona-based company reported robust year-over-year growth of 16%, with 91,878 retail units sold in Q1 2024. This resulted in total revenue surpassing $3 billion, a 17% increase compared to the previous year. The company achieved record Q1 net income of $49 million.
This record performance has impacted its inventory dynamics, with the average time from posting a vehicle on the website to customer purchase decreasing to just 13 days in March, nearing an all-time monthly low.
As Garcia noted, “Our inventory is currently smaller than we would like, resulting in less selection available to our customers. All else constant, we believe this is negatively impacting our sales volumes today.”
To address this challenge, the retailer has begun ramping up production nationwide, with a focus on expanding selection levels for customers in the near term.
Additionally, the company aims to enhance its reconditioning capabilities — it has capacity for 1.3 million units per year, over 3 times its current volume — which are crucial for scaling but require substantial physical infrastructure and regulatory approvals.
This will be done by leveraging its existing infrastructure and developing a playbook to optimize reconditioning operations, including the conversion of ADESA wholesale auction locations into Carvana reconditioning centers. The successful conversion of an ADESA site in Buffalo, New York, highlights the company’s progress in this regard, management pointed out, with Carvana’s proprietary technology, CARLI, facilitating efficient vehicle reconditioning.
Moreover, the company said it is committed to reducing retail costs, including reconditioning and transport expenses, while also focusing on growing its wholesale business. The acquisition of ADESA in 2022 has bolstered Carvana’s position in the wholesale vehicle auction market, allowing the company to enhance its offerings and develop a new digital auction platform, ADESA Clear.
Looking ahead, Garcia emphasized the importance of maintaining a balance between seizing growth opportunities and ensuring flawless execution, while driving innovation, optimizing operations, and delivering seamless customer experiences in the automotive retail sector.
“The last couple years have been absolutely brutal, but they have cleared the competitive field quite a bit. And also, as a result of us getting it wrong [in previous years], we’re very well positioned from an infrastructure perspective and forward growth looks good,” he said.
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