CarLotz, Inc. ((the "Company" or "CarLotz", NASDAQ:LOTZ), a leading consignment-to-retail used vehicle marketplace, today announced the closure of 11 dealership stores, or "hubs," as part of a strategic review of the business, with cash preservation and future profitable growth as key determining factors. In addition, three locations with executed leases will not be opened. The Company will focus on growing the remaining hubs which it believes will produce, in combination, the highest future growth potential, highest profit potential, and the most attractive sourcing opportunities.
"While decisions that impact our teammates are not taken lightly and are not easy, we believe the hub closures are a necessary step to help improve the Company's financial performance. We greatly appreciate all our teammates have done for CarLotz and are committed to help support them through this transition," said Lev Peker, CEO of CarLotz.
The Company is closing these 11 hubs for retail sales on June 21, 2022 with all hub closing activities to be completed by July 8, 2022. The closures will result in an estimated workforce reduction of 25% to 30%. The Company estimates the closures should reduce loss from operations by approximately $12 million to $13 million on an annualized basis. This estimate assumes, among other things, that the Company will be unable to sub-lease any locations. The Company is evaluating opportunities to sub-lease or assign certain locations to interested parties. If we are able to sub-lease or assign the leases associated with the 11 hubs and the three unopened locations, the Company estimates an additional savings of $7.5 million to $8.5 million in occupancy costs per year.
In addition to the anticipated reduction in loss from operations going forward, the Company believes the hub closures should provide additional working capital of approximately $10 million, as inventory is liquidated based on anticipated sale prices at these locations. This anticipated increase in liquidity will be partially offset by one-time severance costs of approximately $500,000 to $600,000. The Company estimates one-time non-cash charges of $2 million to $5 million associated with the impairment of lease assets and $5 million to $6 million associated with the impairment of other fixed assets. Other future costs, such as contract termination costs, are yet to be determined and will be dependent in part on current lease negotiations.
"Over the last twelve months, our sourcing has been challenged. Growing our mix of consumer sourced vehicles is a priority to complement our retail remarketing sourcing channel and reduce our reliance on auctions. We believe the closures should allow us to improve sourcing across a smaller hub base and focus on the productivity and efficiency of the remaining hubs. We also believe this is the first step to building a stronger CarLotz, enhancing cash preservation, and creating a path to profitability," Peker continued.
The following hubs are being closed:
- Atlanta – Lilburn, GA
- Bakersfield, CA
- Clearwater, FL
- Highland Park, IL
- Merritt Island, FL
- Mobile, AL
- Nashville – Madison, TN
- Plano, TX
- San Antonio, TX
- Seattle – Lynnwood, WA
- St. Louis – O'Fallon, IL