Cazoo has confirmed it will cut 750 jobs in the UK and the rest of Europe as part of a plan to cut costs by £200m.
The layoffs will see Cazoo’s workforce reduced by 15% as it grapples with disappointing sales and a slump in consumer confidence that has seen people cut back on big purchases.
The online used-car dealership has seen its share price plummet 87% since listing on the New York Stock Exchange at an eye-watering £5billion valuation last year.
Cazoo blamed the “economic climate” for his troubles. The company says it will also reduce its marketing spend after securing a slew of big-budget sports sponsorship deals.
The Cazoo brand name has graced the shirts of Premier League clubs Everton and Aston Villa. The company also has partnerships with Derby Horse Racing Festival, Snooker’s World Tour, Welsh Rugby Team, European Golf Tour and Professional Darts Corporation.
However, while its founders and investors received a big day’s pay when Cazoo entered into a so-called “blank check” deal, the company struggled to realize much of the profit.
Cazoo said he hopes putting hundreds of people out of work will help improve results. He is aiming for profits of around £600 for every car sold. That’s well below traditional car dealership margins of well over £1,000 per car.
Cazoo is aiming for 70,000-80,000 sales a year to achieve revenue of around £1.4 billion.
Cazoo said: “The company is not immune to the rapidly changing global economy and the possibility of a recession in the months ahead.
“As a result, management’s expectations for the full year are now more cautious, reflecting a weaker and uncertain external environment.”
Cazoo Founder and Managing Director, Alex Chesterman, added: “The combination of rising inflation and interest rates with supply chain issues caused by the pandemic and war has driven up the cost of life and damaged consumer confidence.
“This perfect storm put cash conservation at the forefront of the corporate mindset, ahead of growth.”
The company raised $1 billion from investors when it first listed its shares in a so-called special purpose acquisition company (Spac) transaction last year.
Spacs have been controversial because they allow companies to raise large sums of money without having to comply with some of the strict requirements that come with a traditional stock market listing.
Instead of selling shares directly to investors, a company seeking listing will “merge” with a company that is already publicly traded. In Cazoo’s case, it was a shell company called AJAX that had raised funds with the help of hedge fund manager Dan Och.
Critics say Spacs serve primarily to facilitate speculation and are a symptom of a recent bubble in tech stocks that has seen investors ready to kick in at fast-growing but unprofitable companies.
Cazoo Founder Alex Chesterman said, “I’m very proud of the incredible team and company we’ve built so far.
“The opportunity before us remains more exciting than ever and we continue to see record sales levels, despite the difficult economic environment.
“However, we need to focus on our goal of profitability and capital preservation.”
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This notice was published: 2022-06-07 11:46:34