Cazoo (NYSE:CZOO) shares soared more than 180% after the Company reported record second-quarter revenue. The online auto shop in the United Kingdom reported a 144.9% increase in income from the previous year to £333M, boosted by a 124% increase in vehicle sales. The gross profit per unit increased from £185 in the previous quarter to £309 in the current quarter.
“We generated record revenues and retail unit sales in Q2 and dramatically increased our market share, despite the challenging macroeconomic background, as the consumer move toward online car buying accelerates,” CEO Alex Chesterman OBE stated. “Despite the fact that we only launched two and a half years ago, we have now sold more than 80,000 retail units entirely online, including over 30,000 in the first half of this year, and we achieved record revenues in H1 of £628m, up 153% YoY, as consumers continue to embrace the selection, value, transparency, and convenience of our proposition,” says the Company.
He also stated that the corporation is making strides toward its long-desired profitability, with strong sales and improved unit margins urging management to do so. “Our Q2 result gives me confidence in our goal to position Cazoo for profitable development,” CFO Stephen Morana stated. Nonetheless, Morana announced his departure during earnings, citing the Company’s net loss of £243 for the first six months of the year as a major source of concern for management.
“At the end of June, our balance sheet remained healthy, with over £575m in cash and self-financed inventory,” Chesterman said. “However, given our emphasis on cash preservation and profitability, we have initiated a full strategic review of our business in mainland Europe, with the goal of further reducing cash burn and ensuring that we have an executable plan that materially reduces any additional external funding requirement.”
On Tuesday, shares of the online vehicle retailer soared more than 180.34% on extremely high trading volume. Over 26 million shares were traded on Tuesday in the first 40 minutes of trading. The name’s average daily trading volume is only 2.7 million. After receiving a delisting warning owing to its low share price in recent months, the pop brought shares soaring back into NYSE compliance territory. Despite the rise, shares were still trading at 90% of their top in 2021.
The corporation trimmed costs in June by reorganizing its employees and realigning its business to boost profitability, with considerable staff cutbacks included in the plan. While the corporation reported record sales in May, margins remain tight, and the possibility of a recession grows. Given the likelihood of a recession in the coming months, the online vehicle store stressed the importance of focusing on cash preservation at this time.
“The combination of growing prices and interest rates, as well as supply chain challenges created by the epidemic and conflict,” CEO Alex Chesterman explained. “This perfect storm has prioritized cash conservation over expansion for the Company.”
To advance this cash preservation priority, management stated that it plans to reduce selling, general, and administrative (SG&A) costs per unit, reduce headcount by about 15% across 750 roles and slow hiring of new employees, cut marketing expenditure and temper growth aspirations, among other key initiatives. The corporation intends to save approximately £200 million by the end of 2023.
The most recent casualty of lowering growth expectations was guidance for the remainder of the fiscal year. Following the implementation of the business restructuring plan and taking a more conservative attitude for the balance of the year, the Company is now guiding to the following results for FY 2022:
The Company anticipates retail unit sales of 70,000 to 80,000, with revenues of £1.4 billion to £1.5 billion. The Company had previously forecasted 100,000 retail unit sales to produce “revenues in excess of £2 billion” at the start of the year. Cash and cash equivalents are expected to exceed £250 million by the end of the year, and the Company intends to achieve cash flow breakeven in the UK by the end of 2023.
“We must be laser-focused in our pursuit of profitability and capital preservation,” Chesterman stated. “We presently have a very strong balance sheet with over £400 million in cash and over £200 million in self-financed inventory, and we believe that our business realignment strategy will position us well to fulfill our long-term goals and capitalize on the immense market opportunity.”
Featured Image: Megapixl © Aoleshko
