CarLotz, Inc. (LOTZ) stock prices were down by 1.51% as of the market closing on May 25th, 2021, bringing the price per share down to USD$5.21 at the end of the trading day. Subsequent pre-market fluctuations saw the stock fall by 19.19%, down to USD$4.21.
Pausing of Consignments
In a Form 8-K filed with the SEC, the company stated the pausing of consignments to the company from LOTZ’s corporate vehicle sourcing partner. The sourcing partner cited the current deplorable wholesale market conditions as the driving force behind this. Over the course of the quarter ended March 31st, 2021, the sourcing partner accounted for more than 60% of the cars sold and sourced. For the second time in the company’s history, the sourcing partner accounted for less than 50% of the cars sold and roughly 255 of cars sourced.
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Devastated Wholesale Vehicle Market
The increase in pricing of wholesale vehicles and the ongoing new car chip shortage has been a persistent obstacle in the sourcing of inventory throughout the industry. In conjunction with the pausing of the company’s profit sharing account, the company has reported severe challenges in meeting their expected inventory levels.
Coping with Challenges
As a means of coping with this challenge, the company has been taking steps over the last several months to consolidate their sourcing from other channels. Based on these steps, LOTZ anticipates increased access to vehicles from consumer consignments, trade-ins, and consumer purchases. The company also anticipates an enhancing of their ability to source vehicles through auctions profitably. LOTZ has reiterated its commitment to increasing non-competitive sourcing through consignment and bulk buys by including new corporate sourcing accounts.
Opening of New Hubs
The company’s newest hubs performed well, with the new hub pipeline staying strong as the company continues to expect the opening of 14 to 16 hubs over the course of 2021. As a result of various factors including negotiations, licensing, and zoning, the makeup and expected timeline of the rollout of the pipeline has changed. Consequently, the grand openings of a handful of the new hub locations will take place further along in the year than was originally planned. Furthermore, the 2021 contribution from those hubs is expected to be less than hitherto thought because of the timing.
Future Outlook for LOTZ
While the ongoing challenges in the overall sector have affected the performance of LOTZ stock prices, the company is confident in the growth expected from the opening of their new hubs until the wholesale vehicle market stabilizes. Current and potential investors are hopeful that the company will continue to leverage the resources at its disposal to usher in significant and sustained increases in value.
