How Motorpoint’s Strategic Job Cuts and Cost Savings Bolster Car Dealer amid Consumer Downturn

Motorpoint successfully reduced losses in the second quarter by implementing various cost-cutting measures, including job cuts.

The online motor dealer announced on Thursday that underlying pre-tax losses decreased to approximately £600,000 in the three-month period ending on September 30, compared to £3.1 million in the first quarter.

However, Mark Carpenter, CEO of Motorpoint, cautioned that demand is still facing significant pressure. He stated that the actions taken by the company have positioned it to overcome the challenging macroeconomic cycle as a leaner and more agile business.

Cuts: Motorpoint slashed another 10% of its workforce in July

Motorpoint reduced its workforce by an additional 10% in July, following 134 job losses in 2022, as part of a cost-saving plan expected to save around £3 million per year.

Due to the normalization of the used car trade after the pandemic boom, as well as increasing consumer pressures, Motorpoint paused store rollouts and reduced discretionary capital spending.

Additionally, the company made changes to its inventory sourcing strategy, relying more on direct supply channels and leveraging data to optimize sales prices.

Motorpoint stated: “Our right-sizing program proved beneficial to our performance in Q2, considering the challenging macro conditions. We anticipate that used car values will gradually align with historical levels as new car supply improves, which will further improve affordability for our customers.”

Despite incurring a one-off exceptional charge of £1 million for redundancy costs, Motorpoint achieved an underlying operating profit of approximately £1.6 million before interest expense of £5.3 million in the first half of the year.

The company generated net cash from operations in the first half and ended the period with net cash of £11 million, compared to £2.2 million at the end of June.

Motorpoint expects to announce its interim results on November 23.

Mr. Carpenter stated: “The impacts of high inflation, interest rates, and consumer uncertainty continue to affect demand for used cars. We have responded by reducing our cost base and expanding our retail criteria to help customers find the car of their choice at a price they can afford. We have successfully preserved cash while making progress on selective strategic initiatives and are well positioned to emerge from this difficult macroeconomic cycle as a leaner and more agile business, ready to seize significant opportunities as market conditions improve.”