Musk blindsided Tesla staff with store wind down

Bloomberg

Tesla Inc. Chief Executive Officer Elon Musk caught many employees by surprise with his announcement last week that the electric-car maker would close most stores and shift to online-only sales, according to three people familiar with the matter.
Many sales personnel first found out about the decision when Tesla published a public blog post, said the people, who asked not to be identified discussing sensitive matters. A Barclays analyst added to a chorus of concerns raised by some investors also caught off guard by the move by cutting his price target on the stock.
Tesla declined to comment on the sales shift beyond the blog post and an email Musk sent employees later that day. The stock has dropped as much as 16 percent, shaving up to $8 billion from Tesla’s market capitalisation. The shares pared declines after the company downplayed a customs issue that has held up Model 3 sedans at China ports.
The abrupt move by Musk, 47, shocked Alex Chalekian, the founder and CEO of Lake Avenue Financial in Pasadena, California. The firm, which manages more than $150 million in client assets, sold all of the Tesla stock held for advisory clients.
“This was a total 180-degree turn,” Chalekian, who owns a black Tesla Model S, said in a phone interview. “Tesla had been talking about expanding stores, and all of a sudden they are closing them. To me, this signals a huge financial concern and a possible cash-flow issue for Tesla.” Until last week, Tesla’s store strategy seemed to be one of expansion. The Palo Alto, California-based company opened 27 new retail and service centers last quarter, boosting its total to 378 locations worldwide, according to its latest letter to shareholders. It was the most openings for a quarter since mid-2017.
Tesla also suggested a brick-and-mortar retail strategy was important in its annual report filed February 19, just nine days before Musk announced the pivot to online sales.
“Our Tesla stores and galleries are highly visible, premium outlets in major metropolitan markets, some of which combine retail sales and service,” Tesla said in its 10-K filing. “Opening a service center in a new geographic area can increase demand. As a result, we have complemented our store strategy with sales facilities and personnel in service centers to more rapidly expand our retail footprint.”
Tesla has already closed several stores, including one at the International Market Place in Honolulu and another at the Gardens on El Paseo near Palm Springs, California. Calls to those stores now ring through to Tesla call centers in Las Vegas and Fremont, California. “Much of the bull narrative has rested on Tesla being the next Apple, selling high-volume EVs at premium price point and at high gross margins, in part aided by a unique branded retail experience,” Brian Johnson, a Barclays analyst, wrote in a report.