The U.K.-based flat-fee real estate company Purplebricks announced Tuesday it’s shuttering its operations in Australia two-and-a-half years after launching. The company also announced it’s conducting a full review of operations in the United States.
“Whilst good progress has been made in launching our brand across the U.S., the Board has materially cut investment in marketing and other overheads to reduce expenditure to sustainable levels and begun a strategic review,” the company said in a statement to investors. “As part of this review, management proposes to examine the options for delivering the next phase of growth in a more effective and cost-efficient way, including more closely considering the opportunities and risks associated with a materially scaled back U.S. business.”
Purplebricks made its first foray into the United States in late 2017, launching first in Los Angeles. It’s since expanded into California, New York, Connecticut, Nevada, Arizona, Florida and New Jersey.
Despite that growth, the company has struggled financially, with both its U.S. and U.K. CEOs leaving the company in February and the company reducing its expected revenue guidance. It’s U.K. stock price has fallen 65 percent in the past year, according to Bloomberg.
The company pivoted its model in the U.S. to begin offering varying fees in different markets and success-based pricing where a homeowner only pays those fees if the home sells. It was a move that brought Purplebricks more in line with traditional real estate brokerages than the disruptor it was billed as when it launched in the U.S.
Paul Pindar, Purplebrick’s non-executive chairman, blamed the company’s rapid expansion and spending decisions for the company’s struggles.
“With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered,” Pindar said in a statement. “We have also made sub-optimal decisions in allocating capital. We will learn from these errors and will not make them again.”
Now the company’s latest moves have it shuttering its Australian outpost – due in part to market conditions – while reviewing its U.S. business model. The company at the same time praised the success of its operations in the U.K. and Canada.
“During the two and a half years that Purplebricks has been operating in Australia, market conditions have become increasingly challenging,” the company said in a note to investors. “This, combined with some execution errors, has resulted in the business not delivering the progress the Board expected.”
“The Board has therefore concluded that the prospective returns from Australia are not sufficient to justify continued investment,” the statement continues. “Accordingly, the Group has chosen to exit the Australian market and the business there has been put into an orderly run down with immediate effect, pending closure.”
Michael Bruce, the company’s founder and current global CEO – who was also overseeing U.S. operations on an interim basis after U.S. CEO Eric Eckardt’s departure – is also stepping down. Vic Darvey, previously Purplebricks’ Chief Operating Officer, is taking the role of CEO and being appointed to the board of directors.
“Going forward, we have a very clear understanding of the levers available to us to achieve growth,” Darvey said in a statement. “We have two outstanding businesses in the U.K. and Canada, both of which enjoy market-leading positions.”
“We have also made significant progress in the U.S. building a disruptive brand in the real estate market and our proposed strategic review will allow us to determine how we deliver the next phase of growth in a more effective and cost-efficient way,” Darvey added.
Purplebricks will report financial results on July 3 for the year that ended on April 30.