Online used car retailer Cazoo is reviewing its fledgling mainland European businesses and could pull out of some markets as it struggles to control its spending in a poor investor environment.
The British company’s push into Europe was a big part of its aggressive plan to dominate the digital side of used car sales, and it was still announcing new market entires as late as this June.
However, its need to preserve cash to avoid seeking new investment has forced a U-turn.
“In times like these, businesses like ours need to be laser-focused on what's most important,” founder and CEO Alex Chesterman told investors on Tuesday, when he announced a “full strategic review” of the European businesses.
Closing down its operations in France, Germany, Italy, Portugal and Spain altogether is one potential outcome.
Chesterman spoke about a “range of options, including everything from business as usual and doing nothing, to a small investment in those markets, to withdrawing from some or all of those markets”.
Cazoo posted a loss of £243 million in the first six months, compared with £102m in the same period last year. The company, founded in 2018, lost £550m in 2021.
Cazoo sold 23,955 cars in the second quarter, up 124% from the same period the year before, and is targeting 70,000-80,000 for the full year.
Some of the spending including buying up businesses across Europe as the company expanded its operation. It spent €80m (£67m) in January buying Italian online car retailer Brumbrum ahead of launching in Italy in June. That followed a May launch in Spain, which included becoming the main sponsor of the Real Sociedad and Valencia football teams. The company launched in France and Germany late last year.
Cazoo’s mainland businesses accounted for less than 10% of sales in the second quarter but accounted for one third of the company’s loss in the period, Chesterman said.
In June, Cazoo announced 750 job cuts, equating to 15% of the workforce, and the closing of its subscription schemes to new customers in a bid to reduce spending.
The company bought subscription operators Cluno in Germany for £60m and Swipcar in Spain for £24m as part of its growth drive.
Cazoo’s ability to raise new investment money has been damaged by fall in its share price that cut its valuation from a high of $7 billion (£5.7bn) to below $1bn now.
Companies that have seen a dramatic loss of share value are often reluctant to raise new money in the immediate aftermath, because it would lock in a new, much lower valuation for the company. That might explain Cazoo’s decision to preserve its remaining cash and downgrade its ambitions rather than raise new investment money.
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I'll never understand why anyone would spend 15k on a secondhand car unseen.