Lookers shares crash on profit warning
Lookers shares crashed on Friday after the car dealership warned that annual profit was set to fall sharply - its second profit warning in less than four months - and announced the departure of its chief executive and chief operating officers.
FTSE All-Share
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Lookers
129.80p
16:39 06/10/23
In its half-year results in July, Lookers highlighted weakness in consumer confidence due to political and economic uncertainty, pressure on used car margins and retail cost inflation. It said on Friday that it expected these conditions to continue to impact the group during the second half, but trading, particularly over recent weeks since mid-September, had been "much more challenging than expected".
As a result, it now expects to report an underlying full-year pre-tax profit of around £20m. This is down from £63.7m in 2018 and well below analysts' expectations of around £39m.
For the third quarter, it reported a 3.2% decline in like-for-like unit sales of new cars versus a market drop of 0.6%. September is usually one of the most profitable trading months of the year. However Lookers said that despite the level of orders for new cars both before September and in the first half of the month being satisfactory, it lost momentum as the month progressed and had a much weaker-than-expected finish.
The used car market remained relatively stable, with LFL unit sales of used cars 2.6% firmer, up from 2% growth in the first half.
Chairman Phil White said: "It is disappointing to report this downturn in trading, but we have taken action to drive the future financial performance of the group. The board is resolute in its determination to restore the group's fortunes with market leading practices in the sector."
The company said it had identified 15 dealerships for closure and, where possible, relocation or consolidation into existing dealerships in adjacent territories.
"The board believes that as well as driving financial efficiencies, this will facilitate an enhanced customer experience in line with the group's strategy of partnering with the right brands in the right locations," it said.
Lookers also announced the departure of chief executive officer Andy Bruce and chief operating officer Nigel McMinn with immediate effect. Phil White has agreed to become executive chairman and non-executive director Richard Walker will assume a part-time executive role until permanent successors have been appointed.
Independent retail analyst Nick Bubb said Lookers: "This has been a terrible year for the once well-regarded Manchester-based car dealer Lookers and there have been rumours in the market that the group had missed out on the recent stabilisation in the industry, but few could have expected the scale of today’s profit warning with the Q3 update or that the highly experienced CEO Andy Bruce would be forced to fall on his sword.
"We think the market was expecting something like profit before tax of £38m/£39m for the full-year. In a challenging first half, profits fell from £40m to £29m, so this means that Lookers expect to report a small loss in the second half, with poor sales of new cars the key problem (September is the usually very profitable plate-change month in the new car business)."
Russ Mould, investment director at AJ Bell, said: "The car industry seems to be going from bad to worse judging by the latest profit warning from retailer Lookers. A severe downgrade to earnings expectations and the departure of its chief executive and chief operating officer follow previous earnings warnings and a probe by the financial regulator into past selling practices.
"So much bad news is piling up at Lookers that it isn’t really a surprise to see the board want new leadership.
"In times of strife you need someone who is prepared to make very bold decisions to stop the business going into a ditch. But finding someone brave enough to take the top job at Lookers won’t be easy given the headwinds facing the sector."
At 0930 GMT, the shares were down 14.2% at 42.54p.