Bapcor Flags $12M Earnings Hit and Potential NZ Impairment Risks

• 1Q26 sales down 2.7% to $497.7 million
• Tools and equipment business under operational review with $12M earnings impact
• Cost savings initiatives targeting $20M pre-tax in 2H26 with $4M implementation costs in 1H26
• FY26 statutory NPAT guidance revised to $40-50 million, underlying NPAT $51-61 million
• Potential impairment risk flagged for New Zealand segment amid deteriorating conditions

Challenging Start to FY26

Bapcor Limited, a leading automotive parts and services group, has revealed a tough first quarter for FY26, with sales revenue slipping 2.7% year-on-year to $497.7 million. The decline reflects a combination of competitive pressures, particularly in the Trade segment, and operational disruptions within its tools and equipment business.

Management has been actively addressing these challenges through a series of operational reviews and strategic initiatives aimed at restoring competitiveness and customer confidence. These include pricing and product range adjustments, targeted promotions, and a renewed focus on staff training and recruitment.

Operational Review and Cost Savings

The tools and equipment division within the Trade segment has been identified as a key area requiring urgent attention. An external review has uncovered unsatisfactory practices leading to a $12 million pre-tax hit in first-half earnings due to margin impacts and inventory adjustments. Management changes have been implemented to steer this turnaround.

Alongside operational fixes, Bapcor is pursuing cost savings initiatives expected to deliver approximately $20 million in pre-tax benefits in the second half of FY26. These savings stem from supply chain optimizations, support office simplifications, and a reallocation of resources towards customer-facing activities. However, these efforts come with upfront implementation costs of around $4 million in the first half.

Segment Performance and Market Conditions

The Trade segment saw a slight revenue decline of 0.9%, with tools and equipment sales particularly affected by tighter credit management and reduced discounting. The Networks segment showed earnings growth, benefiting from prior warehouse rationalizations, while the Retail segment continues to grapple with a challenging environment, especially within the Autobarn brand.

In New Zealand, worsening macroeconomic conditions have pressured margins and increased price competition, prompting Bapcor to flag a potential impairment of intangible assets in this segment. The company will monitor this closely ahead of its half-year results.

Guidance and Outlook

Bapcor’s guidance for the first half of FY26 anticipates statutory net profit after tax (NPAT) between $3 million and $7 million, excluding any New Zealand impairment. Underlying NPAT, stripping out one-off costs, is expected between $14 million and $18 million. For the full fiscal year, statutory NPAT is forecast at $40 million to $50 million, with underlying NPAT ranging from $51 million to $61 million.

The company expects a significant earnings improvement in the second half, driven by operational enhancements, pricing realignment, and the realization of cost savings. Capital expenditure is planned between $32 million and $38 million, focusing on branch expansions and technology investments to support future growth.

Despite the headwinds, Bapcor maintains strong liquidity and remains comfortably within its debt covenants, providing a stable platform for executing its turnaround strategy.

Bottom Line?

Bapcor’s FY26 journey hinges on executing its operational overhaul and cost savings amid ongoing market pressures.

Questions in the middle?

• How will the tools and equipment business turnaround impact long-term profitability?
• What is the potential scale and timing of the New Zealand segment impairment?
• Can Bapcor accelerate sales growth to offset inflationary and competitive pressures in 2H26?