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A weaker than expected start to the latest financial year led to a slump of more than 20 per cent in the market value of auto equipment retailer Bapcor (ASX: BAP) this morning, although the company is forecasting a significant improvement in bottom-line profit in the second half.
Shares in Bapcor, which owns the Autobarn and Autopro brands, fell to a low of $2.49 this morning, down 21.4 per cent, after revealing a 2.7 per cent fall in revenue to $497.4 million for the September quarter.
Bapcor says a drop in consumer discretionary spending has hit its retail operations, particularly Autobarn, while its trade segment revenue also fell 0.9 per cent compared with a year earlier as its overall market share fell slightly.
Bapcor’s other major operations include the Midas and ABS auto service centres and Burson Auto Parts, which supplies to trade customers.
The company says operational reviews to improve the group’s performance were a feature of the September quarter, building on a strategic reset for the company in FY25 which was aimed at simplifying operations and reducing the company’s cost base.
During FY25, Bapcor exited or relocated 70 sites including the consolidation of 23 smaller warehouses, while opening 21 new branches or stores and three new state-based distribution centres.
CEO Angus McKay today detailed what Bapcor has done poorly in the past and what the company is doing now to improve its performance over the current financial year.
“Our roots have been built on acquiring businesses, not integrating them,” says McKay.
“Some of the practices that have been accepted inside the wider business do not meet acceptable operational standards nor the required financial/commercial expectations.”
McKay says that over the past 15 months, Bapcor has “methodically progressed the complex work of addressing our structure and capability to re-focus on restoring customer confidence and performance”.
“I acknowledge the continued discovery of historic poor operational practices is frustrating, however we are committed to facing into the issues and correcting them,” he says.
“The turnaround of the business is more challenging and taking longer than expected but will result in a stronger, more sustainable company.
“We remain committed to achieving the five-year indicative scorecard contained within our strategy.”
Among the initiatives implemented to address the company’s flagging fortunes have been pricing reviews on key Burson categories to increase competitiveness; ranging reviews in the trade segment and JAS auto electrical business to ensure the “right stock is in the right location”; and a range of promotions to engage with new and lapsed customers, with a focus on key accounts.
Bapcor says it is also implementing a retail-specific demand and merchandise planning team, while providing training for sales team members, particularly new staff.
The group’s Networks segment, which was previously known as Specialist Wholesale, was among the shining lights of the September quarter with a revenue increase reflecting the benefits of the FY25 warehouse rationalisation program.
Bapcor says the Wholesale and Commercial Vehicle Group businesses are improving their competitiveness, retaining the FY25 cost benefits of the consolidation activity and regaining lost customers impacted in FY25.
However, revenue and earnings in the JAS business continue to be hit by the FY25 consolidation activities. While there has been some improvement, Bapcor notes that progress is slow.
Bapcor is targeting net profit after tax (NPAT) of between $3 million and $7 million in the first half of FY26, excluding any potential impairments associated with the New Zealand segment where the company is making changes to its distribution footprint to generate about $20 million in pre-tax savings in the second half.
Underlying NPAT for first half, before non-recurring items, is expected to be in the range of $14 million to $18 million.
However, Bapcor is targeting statutory NPAT of between $40 million and $50 million in FY26, excluding the potential 1H26 impairment associated with the New Zealand segment.
Underlying NPAT for FY26, before any one-off items, is expected to be in the range of $51 million and $61 million.
Bapcor posted statutory NPAT of $28.1 million and pro-forma NPAT of $80.4 million in FY25.
Bapcor says the full-year FY26 profit will benefit from the operational improvements in place to drive sales growth, the benefits of pricing realignment measures and the cost-savings targeted for the period.
Shares in Bapcor were trading at $2.69, down 48c, at 12.25pm (AEDT).
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