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Carvana Suffers Setback Despite Deliver-to-Doorstep Offering

Ed Ludlow
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Carvana Suffers Setback Despite Deliver-to-Doorstep Offering

(Bloomberg) -- How extensive a blow has the auto industry sustained from the coronavirus? It even managed to take the wind out of the sails of a company whose business model is to sell cars entirely online and deliver them to customers’ doorsteps.

Carvana Co. saw demand slow in mid-March after several state and local governments ordered citizens to shelter in place, the retailer said as it reported a bigger-than-expected quarterly loss Wednesday. Weekly retail unit sales dropped about 30% in April before rebounding to roughly 20% to 30% year-over-year growth in recent weeks.

“Difficulty rarely leaves things as they were,” Chief Executive Officer Ernest Garcia III said on a call with analysts. “We are prepared to return to rapid growth when the time is right.”

Carvana shares plunged as much as 14% in late trading. The Phoenix-based company’s stock has been on a wild ride this year: it surged to a record closing high of $110.09 in mid-February, plunged below $30 within a month, then tripled as of Wednesday’s close.

Read more: Carvana’s loss widens; revenue rises 45%

Investors were concerned Carvana, which hasn’t reported a quarterly profit since it went public in 2017, could run out of cash when fears that industry sales would collapse were at their peak. The company alleviated those worries by raising $600 million through a stock offering and doubled the size of its loan-purchase program with lender Ally Financial Inc. to $2 billion.

Carvana said that while it’s seen demand pick up the last few weeks, consumers are making fewer purchases across the economy, and especially within the auto industry. The retailer also expects to face more competition as the sector is forced to shift to facilitating more vehicle purchases online.

“While trends are very positive, it is still entirely possible that we are in the somewhat early stages of this and we want to get a good look at it before we make sweeping moves,” Garcia said.

(Updates with CEO’s comments starting in the third paragraph.)

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