Around half of Australia's top 500 listed companies are in the red today. However, none are doing it quite as tough as this ASX All Ords share.
A trading update has prompted the Peter Warren Automotive Holdings Ltd (ASX: PWR) share price to shift into reverse. A 0.2% retreat across the S&P/ASX All Ordinaries Index (ASX: XAO) is less than ideal… but how about an 11% drop? That's the punishment being administered to shareholders of this automotive dealership operator.
Shares in this company have now set a new record low, hitting $1.85 apiece. The undesirable milestone means the Peter Warren Automotive share price has cascaded 38% since its 2021 ASX listing.
So, what's the exact cause of this deep laceration?
Expected profits lose some horsepower
Peter Warren Automotive may not achieve the earnings mileage expected by the market in FY24.
Revenue is apparently not an issue, continuing to grow. However, underlying profit before tax is a different story. Several impactful factors have forced the company to adjust the market's view of how the full-year results should look.
The company's full-year FY24 underlying profit before tax is now anticipated to be between $52 million and $57 million. For context, estimates already had down Peter Warren Automotive to generate $68.8 million in before-tax earnings.
At the midpoint, the new guidance reflects a 20.8% downgrade from consensus expectations. Evidently, this is not doing any favours for this All Ords share today.
Three key contributors were referenced as causes for the reduction, as follows:
- More competition between dealerships due to increased supply from car manufacturers, weighing down on new vehicle gross margins
- Subdued demand among customers for new vehicles in light of cost-of-living pressures
- Higher interest rates producing increased interest costs compared to the prior year
Despite the knock to earnings expectations, Peter Warren noted some positive items. These include growth in the number of vehicles sold and an increase in service and parts revenue.
Finally, Peter Warren Automotive highlighted initiatives to reduce the pain of pressured margins. For example, the company is limiting its inventory levels, leaning on growth in its service, parts, and used car segments, and controlling costs.
This All Ords share is not alone
While the Peter Warren Automotive share price is copping the brunt of selling pressure today, other consumer discretionary shares are also feeling the pinch.
In afternoon trading, the consumer discretionary sector is faring the worst on the ASX, down 0.79%. It might have a little to do with April retail trade data hitting the headlines.
The Australian Bureau of Statistics showed a 0.1% month-on-month increase in retail trade last month. Unfortunately, the market expected a 0.2% strengthening after a shocking 0.4% slump in March.
Investors may have interpreted it as another tough month for ASX retailers, including for our All Ords share, Peter Warren Automotive.
