Bapcor’s Trade Segment Struggles Threaten Short-Term Profitability

Disappointing Start to FY26

Bapcor Limited, a leading player in automotive parts and services, has updated its financial guidance for the first half of FY26, revealing a statutory net loss after tax (NPAT) in the range of $5 million to $8 million. This marks a notable setback from previous expectations, primarily driven by underperformance in the Trade segment during October and November.

The Trade segment faced challenges as revenue from tools and equipment declined compared to prior periods, despite modest growth in parts revenue. In an effort to regain market share, the company has implemented pricing reductions across specific parts categories. While these price cuts have negatively impacted margins in the short term, Bapcor anticipates that they will stimulate volume growth in the future.

One-Off Costs and Restructuring Impact

The statutory NPAT loss includes approximately $19 million in pre-tax one-off and non-recurring items, such as an increased estimated impact of $15 million from the review of the tools and equipment business within the Trade segment, up $3 million from earlier estimates. Restructuring costs remain steady at around $4 million pre-tax. These charges weigh heavily on the first half results but are part of a broader effort to streamline operations.

Despite these challenges, the underlying NPAT, excluding one-off costs, is expected to remain positive, between $5 million and $8 million, suggesting that the core business retains some resilience.

Retail and Other Segments Hold Steady

The Retail segment delivered a bright spot with a 1.3% revenue increase over the same period last year, buoyed by strong Black Friday sales. Meanwhile, the Networks and New Zealand segments are performing in line with prior expectations, although the company has flagged potential impairments in New Zealand that remain uncertain and could affect full-year results.

Looking Ahead – FY26 Recovery Plans

For the full fiscal year, Bapcor projects statutory NPAT between $31 million and $36 million, excluding the potential New Zealand impairment. Underlying NPAT is forecast between $44 million and $49 million, reflecting anticipated operational improvements, pricing realignment benefits, and cost savings initiatives expected to generate $20 million pre-tax savings in the second half.

CEO Angus McKay acknowledged the difficulties faced but expressed commitment to the turnaround, highlighting recent key executive appointments – Craig Magill to the Trade segment and Dean Austin to Retail. Both bring extensive experience and are expected to play pivotal roles in driving the company’s recovery.

Financial Position and Market Confidence

Bapcor continues to maintain strong relationships with its lenders and is actively negotiating to increase its leverage covenant for FY26, reflecting prudent financial management amid operational challenges. The company’s ability to execute its turnaround strategy while managing financial flexibility will be critical to watch in the coming months.