CarLotz, Inc. (LOTZ) stock prices were up a significant 21.55% shortly after market trading commenced, with the price per share surging to USD$6.70 early on in the trading day.
Pausing of Consignments
The pausing of consignments to the company from its corporate vehicle sourcing partner was highlighted in a recent Form 8-K filed with the SEC. The stoppage was due to the existing deplorable state of the wholesale market conditions, as per a statement by the sourcing partner. The quarter ended March 31st 2021 saw the sourcing partner account for more than 60% of the vehicles sourced and sold. This marks the second time in the company’s history where the sourcing partner accounts for less than 50% of the car sold and roughly 25% of cars sourced.
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Devastated Wholesale Vehicle Market
The surging prices of wholesale in conjunction with the ongoing new car chip shortage has proved to be a persistent roadblock in the sourcing of inventory across the industry. Along with the pausing of the company’s profit sharing account, LOTZ has reported severe challenges in meeting their expected inventory levels.
Coping with Challenges
The company has taken crucial steps over the last several months as a means of coping with this challenge and consolidating their sourcing from other channels. Following from the execution of these strategies, LOTZ forecasts increased access to vehicles from consumer consignments, trade=ins, and consumer purchases. The company also expects an enhancing of their ability to source vehicles through auctions profitably. The company has reaffirmed 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
As the persistent challenges continue to devastate the overall sector, LOTZ is experiencing a fortuitous surge in the value of its equity in light of an expanded market footprint. The company is confident in the continued growth from its newly opened hubs, thereby poising it for unparalleled success when market conditions stabilize. 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.
