Carvana cites higher reconditioning costs in quarter

In a letter to shareholders, Carvana (CVNA) said: “Reconditioning costs came in higher than our expectations, particularly in locations with the lowest management tenure. We see clear opportunities to make management of our large-scale production facilities simpler and more data-driven, much like we have done for associate and line lead workflows through our proprietary Carli software. We believe this can lower reconditioning costs over time as we scale. As a point of reference, if all production locations had per unit costs in line with the top quartile of locations, our total reconditioning cost per unit would have been $220 lower in Q4. Finally, retail depreciation rates increased sequentially more than last year, leading to an additional impact on Retail GPU. We expect to see elevated reconditioning costs again in Q1, but expect a sequential increase in Retail GPU in Q1.”