Shares in car seller Eagers Automotive dive 19 per cent on poor profit update

The nation’s largest car seller isn’t immune to cost of living pressures with Eagers issuing a profit downgrade.

Shares in car seller Eagers Automotive took a dive 19 per cent on a poor profit update. Picture: AFP

The nation’s largest car seller Eagers Automotive expects a 15 per cent drop in underlying profit for the first half, as cost of living pressures hit consumer spending and inflation drives up the business costs.

The downgrade sent shares in Eagers crashing 19 per cent – wiping $600m from the company’s market capitalisation.

The share price slide was especially painful for Eagers’ largest shareholder, rich lister Nick Politis, who owns 27.23 per cent of the company. His 72.7 million shares at one point during trading on Wednesday were worth $163m less.

Mr Politis, who has been a director of Eagers for more than 20 years, did his best to support the share price and pick up some shares at a knockdown price with a note to the ASX later on Wednesday showing he was buying shares as the stock fell.

According to his change to directors’ interest notice, Mr Politis bought on market 100,000 shares priced at $10.403 per share and a second parcel of 100,000 Eagers stock priced at $10.537 per share.

Eagers, which has around 10 per cent of the car market and operates more than 360 showrooms and dealerships through Australia and New Zealand, told investors that it wasn’t immune to the macroeconomic environment which was characterised by a number of trends which were squeezing earnings.

“Cost-of-living pressures that are moderating retail consumer spending, inflationary conditions driving cost of doing business pressures across the whole economy including Eagers, a current expectation we are at top cycle interest rate conditions; and an increasingly competitive marketplace as more free supply returns for numerous OEMs (original equipment manufacturer) in the marketplace,” chief executive Keith Thornton said in his AGM address.

These external factors had combined with some short-term internal business challenges in the first half of 2024, Mr Thornton said.

“We have experienced some geographic weakness across our operations, particularly softness in New Zealand, which has continued into 2024 with the market down 10.4 per cent year to date, as well as softness in the Sydney and Newcastle markets relative to 2023.”

Given the current market and business dynamics, Eagers now expected to achieve an underlying trading performance for the first half of 2024 that will be approximately 85 per cent of the underlying profit before tax for the first half of 2023.

Eagers told shareholders that even though it was only four months into 2024 the company’s revenue was up 18.3 per cent and it was “well on track” to deliver more than $11bn in total revenue for the year.

“We remain disciplined in our focus across our operations and optimistic regarding the outlook for the remainder of 2024 despite macro headwinds,” Mr Thornton said.

“The new car market remains on track for another record year as our order bank continues to be delivered supporting both revenue and margins, while the underlying order write remains solid.

“In addition, the federal government’s recently announced extension to the Instant Asset Write Off in the 2024 budget and the implementation of the New Vehicle Emission Standard, legislated to begin from 1 January 2025, may provide further catalyst to second half trading.”

Shares in Eagers fell as low as $9.87, dropping 19 per cent, before closing on Wednesday down $1.83, or 15 per cent, at $10.36.