The Bapcor Ltd (ASX: BAP) share price dropped 30% in reaction to weak trading update.
Bapcor is an auto parts business with various brands including Autobarn, Autopro and Burson.
Weak trading update
The business reported that its total revenue for FY25 is expected to be down 1.4% to $1.944 billion.
Only the trade segment saw revenue growth, of 1.4% to $785.4 million. The other segments (specialist wholesale, retail and New Zealand) saw revenue decline by between 3.1% to 3.5%.
Despite the growth, the company said trade sales in May and June, the two largest trading months, were disappointing compared to expectations.
The specialist wholesale segment saw disruption relating to the integration of three businesses into the Auto Electrical Group as well as branch and distribution centre consolidations, headcount reductions and so on.
Bapcor’s retail segment saw a challenging retail environment with lower spending in discretionary categories, competitor and activity and “changes” to its promotional cycle.
In New Zealand, there has been a “more competitive landscape” and “ongoing challenging economic conditions”.
Finally, the company noted there have been supplier disputes and receivable write-offs.
Profit expectations
Due to all of the above, the business is expecting to report FY25 underlying (pro-forma) net profit after tax (NPAT) of between $81 million to $82 million.
Statutory NPAT, after significant items, is expected to be between $31 million to $34 million. This has been impacted by asset write-offs, uncollectable receivables, contractual disputes, changes in accounting estimates, inventory valuation changes, estimated impairment charges and other items – these significant items are likely to be between $48 million to $50 million.
Board resignations
After the close of the market yesterday, three directors resigned – Mark Bernhard, Brad Soller and James Todd.
Executive Chair and CEO Angus McKay thanked the directors for their service to the company.
The board refresh process is “currently underway and will now be accelerated.”
Final thoughts on the Bapcor share price
There was virtually no positive news, aside from targeted savings coming towards the top end of its previously announced range of between $20 million to $30 million.
RBA rate cuts may help the business in the coming months, but there seems to be more problems than just that at play. There could be a recovery opportunity after such a large sell-off, but there are other ASX shares I’d prefer to buy.
