Bapcor shares crash to pandemic lows as earnings flop, three directors quit

Auto parts retailer Bapcor (ASX: BAP) has delivered a sobering trading update, warning that extensive restructuring efforts and challenging market conditions will weigh heavily on full-year results, sending shares tumbling to pandemic-era lows.

The stock opened 23.6% lower ($3.90) and quickly tumbled as much as 31.3% ($3.51) in the first five minutes of trade. This is the kind of update that purges investor confidence, drives up short interest and leaves the stock in limbo.

FY25 Numbers Falls Short of Expectations

The company's preliminary (unaudited) FY25 results paint a picture of a business grappling with significant headwinds:

• Pro-forma NPAT: $81-82 million (down from Citi estimates of $94 million or a 13% miss)

• Statutory NPAT: $31-34 million (after significant items)

• Total revenue: $1.94 billion (down 1.4% and 5.2% below Citi estimates of $2.04 billion)

• Significant items: $48-50 million, including $43.3-45.3 million in the second half

The earnings miss represents a stark departure from the company's ambitious FY30 targets announced at its April investor day, which called for revenue growth above 5% and EBITDA growth exceeding 10% annually.

Restructuring Takes Its Toll

Chief Executive Angus McKay acknowledged that the company's aggressive simplification strategy had created significant near-term disruption. The restructuring program involved closing or relocating more than 45 sites across the network and consolidating multiple enterprise resource planning systems.

"These changes were disruptive but necessary as we strive to simplify operations to set us up into the future," McKay said in the announcement.

The Specialist Wholesale segment bore the brunt of the disruption, with the integration of three businesses into the Auto Electrical Group resulting in branch closures, workforce reductions and system consolidations. Similar rationalisation efforts affected the broader Wholesale division.

Market Conditions Compound Challenges

Beyond internal restructuring, Bapcor faced external pressures across its key markets. The Trade segment, while showing resilience with revenue growth compared to the prior corresponding period, disappointed in May and June. These are traditionally the business's strongest trading months.

The Retail segment continued to struggle with reduced discretionary spending, increased competition and promotional cycle changes. In New Zealand, a more competitive landscape combined with challenging economic conditions further pressured performance.

Adding to the company's woes, certain supplier disputes and receivables identified during a comprehensive balance sheet review were deemed uncollectable, contributing $6.4 million to significant items.

The trading update coincided with a significant board refresh, with three directors - Mark Bernhard, Brad Soller and James Todd - tendering their resignations following the close of trading on 23 July. The board had already flagged an ongoing refresh process, which will now be accelerated.

Where To From Here?

This represents a rock bottom update from Bapcor – with revenues down year-on-year vs. market expectations of single digit growth, unexpected significant items due to a broad range of issues, a Board exodus and lofty FY30 targets that might need to be revised after today.

While management stressed that the restructuring efforts were necessary to position Bapcor for future growth, the immediate impact on trading performance highlights the challenges facing the auto parts sector amid weak consumer sentiment and increased competition.

There's no doubt that Bapcor will face substantial earnings downgrades and target price cuts from analysts. However, it'll be interesting to see if they see value at these 'depressed' valuations, or express caution due to the above headwinds.

There's no denying that the stock might appear 'cheap' and oversold. But such conditions typically leave it in a highly volatile place. Here are some comparable one-day selloffs from other notable large caps in recent months:

• Reece: Shares down (19.2%) after guiding to below consensus FY25 EBIT, with weak construction markets in both ANZ and the US continuing to suppress volumes and margins. Despite the downturn, management maintained its investment strategy, expanding its network and spending on long-term capability.

• Domino's Pizza: Shares tumbled (15.8%) and fell as much as 26.5% intraday after CEO Mark van Dyck announced an unexpected resignation. He was appointed less than eight months ago to lead a business reset.

• Accent Group: FY25 trading update guided to EBIT around 18% below consensus. This downgrade followed a sharp deterioration in H2 trading, with LFL turning negative and gross margins declining amid elevated promotional activity. The stock finished the session down 24%.

• Amotiv: Shares down (16.7%) after the company downgraded its FY25 outlook to marginal revenue growth and a slight decline in underlying EBITA, falling short of prior guidance and analyst expectations.

Following their initial gap downs, both Reece and Accent Group continued trending lower before eventually finding support and bouncing — though both remain well below their pre-selloff levels. In contrast, Domino's Pizza and Amotiv demonstrated more resilient recoveries, bouncing relatively quickly and currently trading near their pre-announcement levels.

Reece (top left), Domino's Pizza (top right), Accent Group (bottom left) and Amotiv (bottom right) price charts (Source: TradingView)