Carvana Fails To Turn A Profit Despite Intense Growth

Carvana Fails To Turn A Profit Despite Intense Growth

Carvana's "car vending machines" are certainly eye-catching, but unfortunately for the used car dealership chain it may not be enough to be profitable. Their growth has been impressive, delivering almost 150 percent greater revenue than last year in Q4. Their gross profit shows promise, but the net figures tell another tale, detailing a loss of over $47 million.

The issue mostly lies in their aggressive expansion. They have nearly doubled their presence across the US in the last year. This includes brick-and-mortar stores and the beautiful but prohibitively expensive vending machines. Following the axiom "it takes money to make money" may prove to be the best tactic for Carvana, though.

Despite their losses, they are extremely well-positioned to have an excellent 2019. If they grow into their expansion, they can use next year's profits as a stepping stone to future pushes. 

Carvana's CEO Ernie Garcia has high hopes for the strategy, stating in a recent interview:
"We are growing rapidly and have more conviction than ever about the business we are building. At the same time, extremely rapid growth paired with a relatively thin operating history has occasionally made the path difficult to predict. Our retail unit sales came in just below our guidance range for Q4 and the full year, largely attributable to weaker than expected results from our Cyber Monday promotion. That said, we are proud of our substantial growth and total GPU gains this year, and as you'll see in our 2018 guidance, we expect our fifth straight year of triple digit top-line growth for Carvana."

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Written By: Todd Hendrickson
Source: The Motley Fool