Despite its vast sports sponsorship outlay over the last two years, Cazoo’s new business realignment plan has cast doubt on the online car retailer’s numerous partnerships.
The company’s extensive sponsorship portfolio covers clubs in the domestic soccer top-flights across England, Spain, Italy, Germany and France. As of May 2022, Cazoo boasted partnerships with 11 different rights holders covering more than 25 properties across nine sports, including cricket, rugby union, darts and snooker.
However, the long-term viability of those deals was called into question in June when Cazoo announced a business realignment plan for Europe, designed to ‘right-size’ the company and position it for profitable growth.
The focus will be on improving retail unit economics, reducing costs and maximising liquidity. This includes making cash savings of more than UK£200 million (US$242 million) from June 2022 to the end of 2023. Approximately 750 roles at Cazoo will be impacted.
The company’s second quarter earnings call last week shone further light on Cazoo’s situation. Having initially launched in the UK, the car retailer has made the move into mainland Europe, with sports sponsorship viewed at the time as an effective way to help establish the brand in new markets.
However, Cazoo chief executive Alex Chesterman revealed in the earnings call that Europe only accounted “for less than ten per cent of unit sales and revenues” in Q2. He expects that contribution to remain the same for the rest of the year.
When asked if Cazoo could sell its mainland European operations, or close them entirely, Chesterman said that he was looking at “a full range of options”, reiterating that the company needed to “reduce cash burn”.
“If we were to shut some markets there would obviously be some costs associated with that, but they would obviously be significantly lower than the investment that is required over the next 12 to 18 months in those markets,” he added.
Stephen Morana, Cazoo’s chief financial officer, also confirmed on the call that the company’s current earnings before interest, taxes, depreciation and amortisation (EBITDA) loss rate in Europe was “roughly around UK£25 million to UK£30 million a quarter”.
The call did not directly refer to Cazoo’s sports partnership commitments, but the company’s head of sponsorship Mike Mainwaring said at SportsPro Live in April that the firm’s model would be “consistent”, though Cazoo’s new business direction could put pay to that.
“The model of investing early as a brand is going to be consistent,” said Mainwaring.
“Where I think it’s slightly different is the scale. In Europe at this stage it’s slightly more balanced. In France we’ve got two football teams and a golf tournament. In Spain we’ve got a couple of football clubs.”