CarLotz closing more stores ahead of planned merger

CarLotz, founded in Richmond, has seen its stock price plummet. (BizSense file photos)

CarLotz is cutting a few more of its car lots.

The struggling Richmond-based used car retailer, which is preparing to be absorbed into a West Coast peer, disclosed in an SEC filing last week its plans to shutter three of its 11 stores.

The closures follow a larger round earlier this year when it unplugged half of its then-22 locations, which it calls hubs.

The SEC filing said the latest stores on the chopping block were in Chesapeake, Denver and Huntsville, Alabama. They closed for sales last week and will go fully dark by Dec. 2.

That will trim the company’s store count down to eight, the same number it had when it went public in 2021. That IPO, done through a SPAC deal, raised around $300 million in capital that was touted as fuel for nationwide expansion.

While it did quickly go out and spend the capital to grow across the U.S., CarLotz has been forced to quickly contract in the face of a tanking stock price and tens of millions of dollars of continuous losses.

A billboard by the used car consignment company.

The company said the latest store closures will cost it nearly $2 million in severance expenses, charges associated with the affected leases, and other related fallout, though it estimates that number could change.

That will add to a $24 million loss posted last week in its third quarter earnings, bringing its loss to-date in 2022 to $84 million.

Its remaining eight stores include two locally on Broad Street and Midlothian Turnpike, along with Charlottesville; Los Angeles; Tampa; Downers Grove, Illinois; and Greensboro and Charlotte, North Carolina.

A CarLotz spokesperson said no decisions have been made as to the future use of the company’s Scott’s Addition headquarters.

It said in the SEC filing: “The company will continue to evaluate its business plan as necessary to address trends in the marketplace and macroeconomic factors.”

CarLotz said earlier in the year that the store closures and related layoffs of 25-30 percent of its workforce are “part of a strategic review of the business, with cash preservation and future profitable growth as key determining factors.” It said at the time the closures should result in cost savings of $12 million to $13 million annually and potentially another $8 million if it can successfully sublease the lots.

The future of the CarLotz headquarters in Scott’s Addition is up in the air after a pending merger with San Francisco-based Shift Technologies.

The decision to slash the 11 stores earlier this summer was made prior to CarLotz announcing its pending deal to be acquired by Shift Technologies and merged into the California-based online vehicle seller.

Should it close as planned next month, the marriage is aimed at combining the strengths and improving the fortunes of two companies that have yet to turn a profit and have both watched their stock prices crater since going public. Shift went public through a SPAC deal in 2020.

The Shift deal has drawn the ire of at least one CarLotz shareholder, who is suing the company to scrutinize the pending transaction.

CarLotz stock closed Monday at 21 cents per share. Its market cap is now $24 million, compared to $1.9 billion at the time of its IPO less than two years ago.

CarLotz was founded in Richmond in 2010 by investment bankers Michael Bor, Will Boland and Aaron Montgomery. While Montgomery and Boland departed from the company prior to the SPAC IPO, Bor stayed at the helm through March of this year. His replacement, Lev Peker, is set to depart as part of the Shift deal.

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William Wallace
William Wallace
13 days ago

This will be a case study in the non-sense, complete scams the SPAC market is. And that the CEO, Bohr, 100% knew his company was destined for BK if going public via SPAC didn’t happen. LOTZ is nothing more than a glorified use car lot that loses money on every car sold. Nice business model. But, Bohr got rich and left everyone else holding the bag. He belongs in jail.

Rich Mond
Rich Mond
1 day ago

The entire executive team laughed all the way to the bank.