07 June 2022

Online car retailer Cazoo, who’s shares are down more than 85% since it floated almost a year ago, has issued a warning that it is downgrading its business plan.

“Expectations for the full year are now more cautious, reflecting the weaker and uncertain external environment,” the company said in a stock market statement.

Under the guise of a “business realignment plan” the company founded by Alex Chesterman said it would “right-size the business and position Cazoo for profitable growth”.

Cazoo blamed the “weaker and uncertain external environment” for the revisions and claimed “growth remains strong and consumers continue to embrace the Cazoo proposition, with record retail unit sales in May, the company is not immune to the rapid shift in the global economy and the possibility of a recession in the coming months”.

However, the firm’s annual results issued just four weeks ago showed the retailer had lost £549.2 million before tax in 2021 and that its gross profit per unit for the first quarter of 2022 was just £124.

Commenting on Cazoo’s announcement, industry expert Mike Jones said: “This looks like a pure cash preservation plan, looking to reduce costs and increase profits with ‘cash conservation top of mind for the company, ahead of growth.’ Cazoo now looking for GPU between £500 and £600 and sales of 70,000 to 80,000 so they are still looking for an acceleration from Q1 2022’s performance of £124 GPU on 13.4k vehicles.

“The company is looking to use current funds and leaseback of property to become profitable without having to go to the capital markets to raise further funds.
Looks like massive breaks being put on the online disruptors on the back of the Carzam news.”

Cazoo said the business realignment plan would save more than £200m a year in costs and listed the following as areas where savings will be made:

• Reducing existing employee headcount by c.15% and slowing the pace of new hiring [750 people]
• Lowering brand marketing spend and focusing more on performance marketing
• Limiting capital expenditure and delaying a number of planned investment projects
• Rationalising vehicle preparation and customer support sites to drive more efficiency
• Increasing focus on driving GPU growth through more efficient buying and reconditioning
• Modifying consumer proposition to drive costs down and improve operating efficiencies
• Increasing procurement efficiencies across entire supply chain to reduce overhead costs
• Slowing near-term growth aspirations in both the UK and EU to focus on profitable growth

Tags: Alex Chesterman, Cazoo