Carvana Co. said on Wednesday it expects a smaller core loss in the current quarter due to a raft of cost-cut measures it implemented amid falling used-car sales, sending its shares up nearly 16 percent in early morning trading Wednesday.
Carvana expects first-quarter core loss between $50 million and $100 million, down from a core loss of $348 million a year earlier.
The used-car retailer, known for its automated car vending machines, allows users to buy cars online and offers home deliveries, which made it popular during the COVID-19 pandemic when people were confined to their homes.
However, demand for used cars has cooled in recent months, as people cut back on discretionary expenses amid recession worries, heaping pain on the industry already struggling with inventory purchased at higher prices.
In a regulatory filing, Carvana estimated vehicles sold in the first quarter will land between 76,000 and 79,000. Carvana sold 105,185 vehicles in the year-earlier period and it sold 86,977 in the fourth quarter of 2022.
Carvana attributed the reduction to higher interest rates, lower inventory size, lower advertising expenses and focus on its profitability initiatives.
Separately, Carvana announced it was offering creditors an option to exchange unsecured notes for those backed by collateral, in a move that will see repayment on some obligations pushed to 2028 from as early as 2025.
The offer would be for a principal amount of up to $1 billion in notes, with a condition that at least $500 million existing notes be validly tendered.
C.J. Moore contributed to this report.
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