Online used car seller Vroom posts weak Q3 outlook

Yahoo Finance's Brian Sozzi, Alexis Christoforous, and Ines Ferre discuss Vroom's latest earnings report.

Video Transcript

BRIAN SOZZI: All right, welcome back to "The First Trade." Let's get back to Ines Ferre for a look at one of the top Trending Tickers on Yahoo Finance. That is online used vehicle platform Vroom. The company posted second-quarter earnings last night and they missed Wall Street estimates.

Ines, what happened? I thought people were buying used cars.

INES FERRE: Well, they are buying used cars. They did have an issue with their inventory for the last quarter. But let's go over some of the numbers.

Vroom's adjusted loss per share came in at $0.34. Its e-commerce revenue increased 45.2%. Its total revenue came in at $253 million. And e-commerce unit sales increased 74% year-over-year. Also the company touted its average monthly unique users, which increased.

But its revenue guidance for the third quarter, the current quarter, is expected to come in anywhere between $268 and $290 million. That's below what the Street had been expected.

Let's get to the issue of inventory. This is what CEO Paul Hennessy said. He said early in the pandemic, we chose to de-risk the business by significantly reducing our inventory during the first half of the quarter. As demand increased and price became more stable through the second half of the quarter, we pivoted to start rebuilding inventory. These lower inventory levels prevented us from fulfilling all of the demand that materialized in the second half of the quarter.

And I went through the earnings call as well. And basically, he went on to explain there that from a sales perspective, the company saw a V-shaped recovery. It had a record month for unit sales in April.

Then inventories were low in May. And unit sales that month were roughly half. And then they rebounded off of those lows, those May lows. And they've seen a strong sequential increase in unit sales in June and July.

Also, the company noted a shift with consumers, saying that they've seen a downward shift in the price points that customers are looking for. And this, Brian, really kind of jives also with what the CEO of Shift.com had said, who was on your program not that long ago, who was also saying that what they've been seeing is basically consumers looking for a little bit of a lower price point.

BRIAN SOZZI: All right, thanks so much, Ines.