The shares of used car companies Vroom and Shift are rallying. Sales have skyrocketed.
Online Used Car Sellers
both reported stronger-than-expected results for the March quarter. A low inventory of new cars in the face of a shortage of chips has led consumers to buy used cars.
Shift (ticker: SFT) posted revenue of $ 106 million for the March quarter, up 254% from a year ago, and ahead of the Street consensus forecast at 94, $ 5 million. The total number of units sold was 5,979, up 181%, of which 4,452 cars sold through the company’s e-commerce platform, up 213%, and 1,527 wholesaled, up by 116%. Gross profit per unit was $ 1,655, more than triple the $ 466 reported in the last year’s quarter. Marketing spend climbed to $ 15.4 million from $ 1.8 million as the company launched a brand promotion campaign that includes television and other media.
For the second quarter, Shift sees revenue ranging from $ 120 million to $ 130 million, up 270% to 301%, with adjusted gross profit per unit of $ 2,000 to $ 2,200. For the full year, Shift sees revenue of $ 480-520 million, with 21,000-23,000 unit sales online and adjusted gross profit per unit of over $ 1,800.
Shift CEO George Arison said in an interview that the company had a “very good quarter” despite the “very strange” market dynamics, which includes very high auction prices for used cars. as consumers seek alternatives in the face of a shortage of new vehicles. He notes that high auction prices don’t have much impact on their business, as the company acquires 87% of its inventory from consumers and partners. He says the company increased its salable inventory by 93% in the March quarter.
Arison says several factors contributed to the good quarter. First, he notes that the company had high costs during the pandemic for used car reconditioning, turning to third parties as the company “struggled to find staff in the right places.” But he says the problem was resolved faster than the company expected. And he also says that a market campaign launched in mid-February is already having a positive impact on the level of consumer activity.
Arison says he’s not really concerned about competition from players like Vroom (VRM) and
(CVNA) – he notes that the three companies together hold less than 1% of the US auto market. Shift has a slightly different model, offering trials in local markets, for example, says Arison. Also, it tends to have a larger inventory, with a large number of older vehicles.
Vroom reported first quarter revenue of $ 591.1 million, up 57%, including e-commerce revenue of $ 422.3 million, up 81%, and wholesale revenue of $ 118 million, up 112%, well ahead of Street’s consensus of $ 518.2 million. Online vehicle sales stood at 15,504 units, up 96% from the previous year. The company lost $ 77.2 million in the quarter, or 57 cents per share, better than the consensus Street forecast for a loss per share of 63 cents. The average price per ecommerce unit sold was $ 26,336, down 7.4% from a year ago. But gross profit per vehicle rose 14.2% to $ 2,054.
For the second quarter, Vroom sees revenue of $ 618 million to $ 640 million, ahead of Street’s consensus estimate of $ 601 million. The company sees e-commerce unit sales of 17,500 to 18,000 vehicles, with wholesale units of 7,500 to 8,000. Vroom predicts that the average price of e-commerce units will be between $ 27,000 and $ 28,000, with a profit per unit of $ 2,500 to $ 2,600.
“Vroom delivered record results in the first quarter of 2021, with total gross profit almost doubling from the same period a year earlier, as we achieved exceptional growth and improved the economy of the unit, ”CEO Paul Hennessy said in a statement. “Demand for our convenient, online used vehicle shopping experience remains strong in a dynamic environment.”
At the end of the session, Shift stock is up 3.4%, to $ 7.65, while Vroom stock is up 10.4%, to $ 39.09.
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