(Reuters) -Carvana on Wednesday forecast annual core profit above analyst expectations, driven by strong demand for used cars and improved inventory management, helping the used car retailer protect its margins.
The company’s shares rose 11% in aftermarket trading.
During the pandemic, used car retailers like Carvana increased their vehicle inventories, often buying at high prices due to the skewed supply of new vehicles.
However, as new car production normalized, Carvana struggled to clear its inventory of used cars, forcing it to sell them at prices below purchase costs, impacting margins.
Carvana, best known for its vending machines, has been working to improve margins and return to profitability.
Earlier this year, the company reported its first-ever annual profit and has since trimmed inventory and cut advertising and other spending to strengthen its balance sheet.
The company now expects its 2024 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between $1 billion and $1.2 billion, compared with average analyst estimates of $890.97 million, according to LSEG data .
“Not only did we lead the industry in unit sales growth, which accelerated from the first quarter, but we also delivered a net profit margin of 1.4% and a new record of 10.4% adjusted EBITDA margin, which is an all-time high for public auto retailers.” CEO Ernie Garcia said.
The total number of retail units sold in the second quarter rose 33% to 101,440 and the company expects this number to increase sequentially in the third quarter.
Carvana reported net income of $48 million, or 14 cents per share, for the second quarter ended June 30, compared with a net loss of $105 million, or 55 cents per share, a year earlier.
