Cars.com is betting that a restructuring and job cuts will help answer an activist investor's call for change and aid the online shopping site's efforts to grow beyond vehicle listings.
The company, one of the industry's largest such sites, said last week it would restructure its sales operations and eliminate more than 100 sales positions. The move came two days after Starboard Value Inc., which has a 9 percent stake in Cars.com, released a letter criticizing the company for "an almost two-year continuing trend of customer losses and organic declines in revenue." Starboard is pushing for a leadership change or sale of the publicly held company if there is not marked improvement in performance.
Cars.com CEO Alex Vetter told Automotive News last week that the company takes investor feedback seriously. He also pointed out the vehicle sales process is rapidly changing for dealers and consumers alike.
"We've intentionally been expanding our business strategy beyond media and listings to capitalize on what we see are increasing dynamics within the industry," Vetter said. "There aren't many dealers I'm talking to today that aren't seeking operating efficiencies."
Cars.com's revenue grew 6 percent to $497.8 million for the first three quarters of 2018, while net income dropped 59 percent to $29.5 million.
The company has about 1,600 employees, including 480 in sales and account management. Only the sales team will be affected by the cuts.
The restructuring will break the company's sales team into four groups: a field team focused on serving and growing customer bases; an expanded account management team; a specialized sales team focusing on more complex and deeper product offerings; and a major accounts team.
Leveraging its name recognition and established national network is one way Cars.com aims to separate itself from other third-party vendors and help sell its services to dealers who otherwise may be trying to launch their own digital solutions.
"Many dealers out there are adding digital tools to their website, but the difference when you work with us is, we're going to provide national distribution and drive traffic directly into the dealer's website," Vetter said.
Among third-party vehicle-shopping sites, Cars.com comes in second in revenue among its peers, behind Cox Automotive with its Autotrader and KBB units, according to AIM Group. Cars.com's revenue growth rate — 4 percent for the 12 months ended Sept. 30 — lags two key competitors, the fast-growing CarGurus and TrueCar.
While newer companies such as CarGurus have poached some of Cars.com's business and national advertising also has taken a hit, analyst Gary Prestopino of Barrington Research Associates Inc. remains fairly bullish on the company.
"It's got a very bright future on a long-term basis," he said. "I'm a more patient investor."
