Vroom: Consumer Demand For Used Cars Eclipses Pre-COVID Levels

Vroom reported fourth-quarter results that showed increased use of online channels to buy used cars.

In terms of headline numbers, Vroom said that revenues came in at $405.8 million, which topped Street estimates of $401 million. However, the adjusted loss of 44 cents a share was worse than the 37 cents a share expected.

In tandem with the mixed results, shares of Vroom fell 12 percent in after-hours trading.

Drilling down into the eCommerce results, the company said that the number of eCommerce units sold in the quarter totaled 11,022, up 74 percent year over year. For the fiscal year, the total number of eCommerce units was up 82 percent to 34,488.

The company said eCommerce-related revenues surged 43 percent year over year to $285 million.

In the earnings release Wednesday (March 3) afternoon, management stated that consumer demand for used vehicles now exceeds pre-COVID levels, where eCommerce units sold sequentially were up by nearly 25 percent.

According to Vroom, the average selling price per unit decreased from $30,808 to $24,909.

Scaling with AI 

“The decrease in average selling price was primarily driven by demand predicted by our data analytics,” the company said.  Artificial Intelligence (AI), as noted on the call, is helping the business scale. As noted in this space late last year, Vroom struck a deal to buy artificial intelligence (AI)-fueled analytics and digital services company CarStory through the purchase of Vast Holdings Inc., according to an announcement.

In evidence of the shift to eCommerce, management pointed on the earnings call to the TDA physical location operations, where total units in the quarter sold were 1,777, down more than 50 percent year on year.  Along those lines, revenues from that segment were down 57.9 percent to $45.8 million.

According to commentary on the conference call from CEO Paul Hennessy and Chief Financial Officer Dave Jones noted that there was more volume and demand than capacity.  The inventory sold in Q4 did not turn fast enough in the quarter, said management.

But in looking ahead, they said, the full year 2021 results should see triple-digit growth in eCommerce unit sales and more than 200 percent growth in aggregate gross profit. The eCommerce sales in the year should be 14,000 to 14,500 units, implying 80 percent growth at the midpoint range.

At the same time that the firm is eyeing such growth, said Hennessy and Jones, the company continues to build out its logistics operations to expand last-mile delivery. At the end of the fourth quarter, they said,  the company operated 8 hubs; that number should expand to 30 hubs by the end of this year, tied to 50 percent of eCommerce sales. In that logistics model, delivering several cars on a truck to a given region is good for operating efficiency.

As Hennessy told PYMNTS in a recent interview, “it’s going to be a real challenge for traditional dealerships that run brick-and-mortar sites very well to suddenly become eCommerce companies. And I would suggest that there’s a big difference between having a website and being an eCommerce company, and between delivering a car in your neighborhood and having a nationwide logistics network.”

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