Carvana Co., the used-car deal that was a pandemic winner, is rushing to conserve cash as once-plentiful financing options dry up and business deteriorates.
On Friday, Carvana laid off about 1,500 people, its second round in six months. Its weakening finances mean raising funds would be difficult and costly, and it could run out of cash in a year, analysts say.
Few companies have been hit harder by rising interest rates than Carvana. The company’s interest expense nearly doubled early this year when it paid up to get financing for an acquisition. Its cost to finance car purchases is up by three-quarters this year, and some of its real estate has lost value. Car buyers, meanwhile, are holding off purchases in the hope that rates fall.
Also read: Used car prices are falling — but monthly payments are spiking as Fed hikes rates.
In a memo to Carvana’s employees announcing the layoffs, Chief Executive Ernie Garcia III blamed an uncertain economic environment that he said was particularly tough on fast-growing companies that sell products affected by higher interest rates. “We failed to accurately predict how this would all play out and the impact it would have on our business,” he said.
An expanded version of this report appears at WSJ.com.
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