Used car lot
Scharfsinn86/DreamstimeOnline used-car sellers Shift Technologies and Vroom both reported stronger-than-expected results for the March quarter. A thin inventory of new cars in the face of a chip shortage pushed consumers to buy used rides.
Shift (ticker: SFT) posted March quarter revenue of $106 million, up 254% from a year ago, and ahead of the Street consensus forecast at $94.5 million. Total units sold were 5,979, up 181%, that includes 4,452 cars sold via the company’s e-commerce platform, up 213%, and 1,527 sold wholesale, up 116%. Gross profit per unit was $1,655, more than triple the $466 reported in the year-ago quarter. Marketing expenses jumped to $15.4 million from $1.8 million, as the company kicked off a branding 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 million to $520 million, with 21,000 to 23,000 online unit sales, and adjusted gross profit per unit of more than $1,800.
Shift CEO George Arison said in an interview that the company had a “really great quarter,” despite “very weird” market dynamics, which includes very high auction prices for used cars as consumers seek alternatives amid a shortage of new vehicles. He notes that the high auction prices don’t impact their business very much, since the company acquires 87% of its inventory from consumers and partners. He says that the company expanded sellable inventory 93% over the course of the March quarter.
Arison says several factors contributed to the strong quarter. One, he notes that the company had elevated costs during the pandemic for reconditioning used cars, turning to third parties given that the company had “trouble getting staffing in the right places.” But he says that problem has been solved faster than the company had expected. And he also says that a market campaign that 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 such as Vroom (VRM) and Carvana (CVNA)—he notes that the three companies together have less than 1% of the U.S. vehicle market. Shift has a slightly different model, offering test drives in local markets, for instance, says Arison. Also, it tends to carry a broader inventory, with a great 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 the Street consensus at $518.2 million. Online sales of vehicles were 15,504 units, up 96% from a year earlier. The company lost $77.2 million in the quarter, or 57 cents a share, better than the Street consensus forecast for a per-share loss of 63 cents. Average price per e-commerce unit sold was $26,336, down 7.4% from a year ago. But gross profit per vehicle was up 14.2% to $2,054.
For the second quarter, Vroom sees revenue of $618 million to $640 million, ahead of the Street consensus estimate for $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 projects average price for e-commerce units to be $27,000 to $28,000, with profit per unit of $2,500 to $2,600.
“Vroom delivered record results in the first quarter of 2021, with total gross profit nearly doubling versus the same period in the prior year as we delivered exceptional growth and improving unit economics,” CEO Paul Hennessy said in a statement. “Demand for our convenient, online used-vehicle shopping experience remains strong in a dynamic environment.”
In late trading, Shift stock is up 3.4%, to $7.65, while Vroom stock is up 10.4%, to $39.09.
Write to eric.savitz@barrons.com
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May 13, 2021 at 05:05AM
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Shares of Used-Car Firms Vroom, Shift Are Rallying. Sales Soared. - Barron's
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