The Bapcor Ltd (ASX: BAP) share price has tumbled lower on Thursday despite the release of a positive trading update. The announcement, which was released prior to the market's open on Thursday morning, included updated profit guidance for the 2020 financial year. At the time of writing, the Bapcor share price was down 2.38% to $5.75 following the news.
What was included in the announcement?
Bapcor announced that the impact of coronavirus restrictions on its business were not as severe as originally anticipated. The company had experienced higher than expected demand, especially across its retail and Burson Trade segments in Australia. Additionally, most of Bapcor's other businesses were recovering more quickly than anticipated and were returning to the level of demand seen prior to the pandemic.
According to the announcement, Bapcor's retail segment experienced strong demand in May and June. Same store sales for Autobarn increased over 45% when compared with the same period in 2019. This came after same store sales fell by 3% in April. Bapcor reported that this sales growth was experienced across both company-owned and franchised stores. For the full year to June 2020, Bapcor estimates that Autobarn's same store sales will increase by around 8%.
The company further reported that Burson Trade experienced strong demand across May and June. Its same store sales growth is expected to be around 10% up on the year prior. This follows a 10% year-on-year fall in same store sales for April. For the full year, the company expects Burson same store sales growth to be around 5%.
The segments of Bapcor that were most heavily affected by coronavirus were New Zealand, Thailand, and specialist wholesale. However, the company reported that these segments are also now recovering from the impacts of coronavirus restrictions.
According to Bapcor, the current strong demand in retail and Burson Trade includes an element of stimulus-induced discretionary spending.
Bapcor's outlook
Following strong performance over the past two months, Bapcor predicted that net profit after tax for the 2020 financial year would be in the range of $84 – $88 million. This prediction was subject to normal, year-end audit procedures. It also excludes significant items relating to major acquisitions as well as transition costs associated with the company's new distribution centre in Melbourne.
The company also announced "Future demand is anticipated to moderate as we enter the new financial year in an environment of economic uncertainty and as government stimulus reduces".
About the Bapcor share price
The Bapcor share price is up 101% from its 52-week low of $2.85. However, it has fallen 10% since the beginning of the year. So why hasn't the automotive giant's share price risen on the back of today's largely positive news from the company? The Bapcor share price did actually rally in early trade today, reaching a high of $5.94. This was followed by a sharp fall and then an additional brief rally before a gradual tapering off to its current price of $5.75 (at the time of writing). My opinion is that today's announcement, whilst positive overall, was pretty much in line with investors' expectations. And because the wider market is falling lower today, the news from Bapcor was not startling enough to garner sufficient buying to offset the general selloff.
