Why Is Cazoo Group (CZOO) Stock Appreciating Recently?

Shares of the UK’s leading online car retailer Cazoo Group Ltd (NYSE: CZOO) have increased 16.42% to $0.7101 after the company issued a review of its EU business strategy on Thursday. Last trading session, Cazoo stock closed at $0.61.

How has CZOO’s review been?

In today’s announcement, Cazoo Group announced that its strategic review of its EU operations has been completed.

  • A review of a variety of strategic options led management to conclude that Cazoo should now focus exclusively on its UK core business, which has an annual value of over £100 billion and an addressable market with 8 million used car transactions.
  • In July and August, UK retail unit sales increased over 100% year-over-year, despite challenging macroeconomic conditions.
  • Cazoo management is very optimistic about the future and its ability to capture a 5% or greater share of the UK market.
  • For Cazoo to continue to scale its operations in the EU, it would require material additional investment, which conflicts with Cazoo’s priority of preserving cash and achieving profitability without additional capital.

The withdrawal from the EU is based on these factors:

  • In consequence, the Company is in consultation with its employee representatives in France and Italy and is in the process of closing down its operations in Germany and Spain.
  • It has notified the relevant unions and employee representatives in each market and will facilitate a structured closure for customers, employees, and suppliers.
  • By the end of 2023, the Company is expected to save over £100m as a result of its withdrawal from the EU, net of wind-down costs.
  • Taking this decision will materially expedite the Company’s path to profitability and remove the need to raise additional external financing.

What is CZOO looking at?

Cazoo (CZOO) expects to have approximately £100m of cash on its balance sheet by the end of 2023 when it expects to reach cash flow breakeven. This decision should have a limited impact on its revenue and unit targets for 2022. This is because the EU businesses represented 10% of the CZOO’s revenues and retail units in H1 2022.