CarParts.com Inc ((PRTS)) has held its Q4 earnings call. Read on for the main highlights of the call.
CarParts.com Inc. recently held its earnings call, revealing a mixed sentiment. While the company made significant strides in expanding its supply chain capabilities, mobile app growth, and B2B expansion, these positives were tempered by a notable decline in revenue, substantial net losses, and increased costs impacting margins.
Gross Profit Margin Near Upper End of Guidance
CarParts.com reported a full-year gross profit of $197 million with a gross profit margin of 33.4%, which was near the upper end of their guidance. This achievement came despite facing various challenges throughout the year.
Expansion of Vertically Integrated Supply Chain
The company has optimized its supply chain with in-house capabilities, leading to attractive product margins in the mid-fifties percent. This strategic move is expected to enhance profitability and operational efficiency.
Direct-to-Consumer Fulfillment Network Expansion
CarParts.com expanded its fulfillment network, now capable of covering 98% of the population with two-day shipping. A new semi-automated facility in Las Vegas is processing 25% of the company’s volume, further boosting their logistics capabilities.
Mobile App Growth
The company’s mobile app has seen impressive growth, amassing over 800,000 users in less than 18 months. The app now accounts for over 10% of the company’s e-commerce revenue, marking a significant milestone in their digital strategy.
B2B Business Expansion
CarParts.com launched same and next-day delivery services in the North Florida market, achieving a contribution margin up to three times higher than their e-commerce operations. This expansion is a key component of their growth strategy.
High Margin Fee Income Offerings
The company introduced high-margin fee income offerings, including shipping and product protections, affiliate revenue, and premium memberships. These initiatives have contributed to increased net profit margins.
Revenue Decline
The company reported full-year revenues of $588.8 million, a 13% decrease from 2023. This decline was primarily driven by increased pricing and soft consumer demand, highlighting challenges in the current market environment.
Significant Net Loss
CarParts.com reported a GAAP net loss of $40.6 million for the year, compared to a loss of $8.2 million in 2023. This was mainly due to lower gross profit and increased outbound transportation costs.
Adjusted EBITDA Loss
The adjusted EBITDA loss for 2024 was $7.1 million, down from $19.7 million in 2023. This decrease was impacted by soft demand and competitive pressure in the market.
Increased Outbound Transportation Costs
The company’s gross margin decline was driven by increased outbound transportation costs, despite achieving a higher pre-freight gross margin.
Inventory Reduction
CarParts.com successfully reduced its inventory balance to $90.4 million at year-end, down from $128.9 million at the end of 2023, reflecting improved inventory management practices.
Forward-Looking Guidance
Looking ahead to 2025, CarParts.com aims to expand its product offering, increase the average basket size, and scale its B2B business. The company plans to focus on high-margin fee income and mobile app growth to diversify its marketing mix. Additionally, maintaining a strong balance sheet and managing cash flow effectively are key strategic priorities as they navigate the $400 billion auto parts market.
In summary, CarParts.com Inc.’s earnings call highlighted both achievements and challenges. While the company has made notable progress in expanding its supply chain and digital presence, it faces hurdles with declining revenue and increased costs. The forward-looking guidance suggests a strategic focus on growth and diversification to strengthen its market position.