AutoCanada Inc. reported a net loss in the first quarter of $46.9 million (all figures in CND) as economic shutdowns that began in mid-March due to the COVID-19 pandemic offset year-over-year retail sales gains in the first two months of 2020.
Total vehicles sold in the quarter ended March 31 fell by 13 per cent to 13,735 units, while revenue dipped 4.1 per cent to $708.8 million. The $46.9-million net loss compares with a $2.7-million loss in the first quarter of 2019.
The results were due to the COVID-19 pandemic shutting down economic activity across Canada and the United States beginning in mid-March, the company said. Through February, AutoCanada, the country’s only publicly traded dealership group, said total retail vehicle sales were up two per cent from a year earlier, driven by a six-per-cent gain in retail vehicles sold in Canada.
The rapid deterioration of AutoCanada’s first-quarter performance underscores the impact of the COVID-19 pandemic on auto retail as governments restricted economic activity to slow the spread of the virus. At the same time, its improving performance in the months since could be an indicator as to what auto retail’s recovery might look like in Canada.
AutoCanada said it has “experienced steady improvements” in revenue and profitability since the end of March in Canada as economic restrictions slowly began to lift. Total vehicle sales at its Canadian stores fell 16 per cent in May from a year earlier, compared with year-over-year declines of 49 per cent in April and 54 per cent in the last two weeks of March.
AutoCanada Executive Chairman Paul Antony said he was “cautiously optimistic” about the future of the business, pointing to the company’s improving performance in the second quarter, as well as the threat of COVID-19 potentially pushing some consumers away from ride-hailing services and public transit toward vehicle ownership.
“Many people may not want to take the chance of getting on a plane, train, taxi, Uber, Lyft or subway, and people are not likely to take flights this summer and are instead driving for summer vacations where allowed,” Antony said during a Thursday conference call with analysts and investors. “In turn, people that had previously moved to public and shared transport could drive an uptick in our business.”
Antony said risk factors related to COVID-19 include potentially reduced service and parts business as people who work from home drive their vehicles less, as well as uncertainty surrounding how quickly the economy might recover.
The dealership group said it laid off about 40 per cent of its workforce, or 1,700 employees, as a cost-saving measure during the pandemic. It also suspended its quarterly dividend “until further notice,” reduced its planned capital expenditures from an average of $29 million the last two years to $12 million this year and has received government assistance on both sides of the border, among other measures.
AutoCanada said it qualified for the Canada Emergence Wage Subsidy, which covers 75 per cent of an employee’s wages up to $847 per employee per week at eligible businesses. It expected to receive about $10 million from the program between April 12 and June 6 and said it plans to assess its eligibility for the final 12 weeks of the program, through Aug. 29.
Its U.S. stores have received about US$5.4 million ($7.3 million) in loans under the federal Paycheck Protection Program, which is designed to assist businesses with payroll costs, rent and mortgage payments.
AutoCanada’s Canadian stores recorded a net loss of $32.6 million, compared with net income of $6.4 million a year earlier. Revenue fell 1.4 per cent to $627 million.
Its U.S. operations recorded a net loss of $14.2 million, compared with a $9-million loss in the first quarter of 2019. Revenue for the unit fell 21 per cent from a year earlier to $82.2 million.
Despite the pandemic, AutoCanada saw signs of progress for its U.S. stores, which have been a drag on the company’s financial performance since acquiring the Illinois dealerships in 2018. Adjusted earnings before interest, taxes, depreciation and amortization in the company’s U.S. unit stood at a loss of $3 million, an improvement of $2.5 million from the first quarter of 2019.
“We’re building a better business case in the U.S.," Antony said.
In total, the company sold 7,326 new vehicles on the quarter, down 21 per cent from a year earlier. New retail sales plunged 23 per cent to 6,289 units, while fleet sales were down 2.5 per cent to 1,037 vehicles.
The decline in used-vehicle sales was less steep, falling 1.7 per cent from a year earlier to 6,409 units.
Parts, service and collision repair revenue dropped 12 per cent to $102.4 million. Revenue from finance and insurance was a bright spot for the company, rising 1.6 per cent from a year earlier to $35.4 million.
AutoCanada shares were up 7.2 per cent on the Toronto Stock Exchange to $9.95 per share as of 12:20 p.m. EDT.