CarParts.com, Inc. (PRTS) Bundle
Understanding CarParts.com, Inc. (PRTS) Revenue Streams
Understanding CarParts.com, Inc.’s Revenue Streams
The company generates revenue primarily through the sale of auto parts and accessories. The main revenue streams include:
- Sales of aftermarket auto parts
- Sales from online marketplaces
- Direct sales through their eCommerce platform
Year-over-Year Revenue Growth Rate
For the third quarter of 2024, net sales amounted to $144,751 thousand, a decrease of 13.3% compared to $166,864 thousand in the third quarter of 2023. For the year-to-date period ending September 28, 2024, net sales were $455,310 thousand, which reflects a 12.3% decrease from $519,334 thousand in the same period of 2023.
Contribution of Different Business Segments to Overall Revenue
While exact segment contributions are not detailed, the overall trend indicates a shift towards higher-value customers, impacting revenue from lower-margin sales. This strategy aims to enhance gross margins despite lower sales volume.
Analysis of Significant Changes in Revenue Streams
The decrease in revenue for the third quarter of 2024 was attributed to:
- Deliberate price increases to target higher-value customers
- Ongoing challenges in the consumer environment
- One-time impacts from external factors such as the Crowd Strike issue and natural disasters (hurricanes Helene and Milton)
| Period | Net Sales (in thousands) | Cost of Sales (in thousands) | Gross Profit (in thousands) | Gross Margin (%) |
|---|---|---|---|---|
| Q3 2024 | $144,751 | $93,769 | $50,982 | 35.2% |
| Q3 2023 | $166,864 | $112,047 | $54,817 | 32.9% |
| YTD Q3 2024 | $455,310 | $302,016 | $153,294 | 33.7% |
| YTD Q3 2023 | $519,334 | $341,524 | $177,810 | 34.2% |
This data illustrates the significant decline in net sales and gross profit, highlighting the challenges faced during the period. The increase in gross margin percentage, however, suggests a strategic shift towards profitability despite lower sales volumes . The overall financial health indicates a need for careful monitoring of revenue sources and market conditions going forward .
A Deep Dive into CarParts.com, Inc. (PRTS) Profitability
Profitability Metrics
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, the company reported:
| Metric | Q3 2024 | Q3 2023 | YTD Q3 2024 | YTD Q3 2023 |
|---|---|---|---|---|
| Net Sales | $144,751 | $166,864 | $455,310 | $519,334 |
| Cost of Sales | $93,769 | $112,047 | $302,016 | $341,524 |
| Gross Profit | $50,982 | $54,817 | $153,294 | $177,810 |
| Gross Margin | 35.2% | 32.9% | 33.7% | 34.2% |
| Operating Expense | $60,900 | $57,734 | $178,457 | $180,935 |
| Operating Margin | -6.9% | -1.7% | -5.5% | -0.6% |
| Net Loss | $(10,018) | $(2,517) | $(25,183) | $(2,137) |
Trends in Profitability Over Time
Net sales decreased by $22,113, or 13.3%, for Q3 2024 compared to Q3 2023. Year-to-date, net sales dropped by $64,024, or 12.3%. Gross profit declined by $3,835, or 7.0%, in Q3 2024 compared to the previous year, and by $24,516, or 13.8%, year-to-date. The gross margin improved by 230 basis points to 35.2% in Q3 2024, while the year-to-date gross margin decreased by 50 basis points to 33.7%.
Comparison of Profitability Ratios with Industry Averages
The company's gross margin of 35.2% in Q3 2024 is higher than the industry average of approximately 30%. However, the operating margin reflects a loss of -6.9%, which is below the industry average of around 5% for similar companies. The net loss margin of -6.9% also indicates a struggle compared to a typical positive net margin in the industry.
Analysis of Operational Efficiency
Operating expenses increased by 5.5% in Q3 2024, amounting to $60,900 compared to $57,734 in Q3 2023. As a percentage of net sales, operating expenses represented 42.1% in Q3 2024, up from 34.6% in Q3 2023. This rise in operating expense percentage reflects increased marketing spend amid declining sales.
The company recorded a net loss of $10,018 in Q3 2024, up from a loss of $2,517 in Q3 2023. The loss from operations was $(9,918) for Q3 2024, compared to $(2,917) in Q3 2023. The significant increase in losses indicates challenges in managing costs effectively amidst declining revenues.
Debt vs. Equity: How CarParts.com, Inc. (PRTS) Finances Its Growth
Debt vs. Equity: How CarParts.com, Inc. Finances Its Growth
Overview of Debt Levels
As of September 28, 2024, total debt for CarParts.com, Inc. stood at $13,335 thousand, a decrease from $16,635 thousand as of December 30, 2023. This debt primarily consists of right-of-use obligations related to finance leases.
Debt-to-Equity Ratio
The company's debt-to-equity ratio is approximately 0.14, calculated from total debt of $13,335 thousand and total stockholders' equity of $97,199 thousand as of September 28, 2024. This ratio is below the industry average, which typically ranges from 0.5 to 1.5, indicating a conservative approach to leveraging debt.
Recent Debt Issuances and Credit Ratings
The company maintains a Credit Facility with a revolving commitment of up to $75,000 thousand, with an option to increase this amount to $150,000 thousand under specific terms. The current outstanding balance on this facility is $0.
Interest Rates on Debt
As of September 28, 2024, the interest rate on drawn loans under the Credit Facility is based on SOFR plus an applicable margin of 1.50% to 2.00%. The current SOFR-based interest rate is 6.94%, and the prime-based rate is 8.50%.
Balancing Debt Financing and Equity Funding
CarParts.com, Inc. has focused on maintaining a balance between debt financing and equity funding. The company has issued shares in the past for various purposes, including stock option exercises, which contributed to an increase in additional paid-in capital, now totaling $322,337 thousand as of September 28, 2024.
| Financial Metric | Value (in thousands) |
|---|---|
| Total Debt | $13,335 |
| Total Equity | $97,199 |
| Debt-to-Equity Ratio | 0.14 |
| Credit Facility Limit | $75,000 |
| Current SOFR Rate | 6.94% |
| Current Prime Rate | 8.50% |
| Outstanding Revolving Loan Balance | $0 |
| Additional Paid-in Capital | $322,337 |
Assessing CarParts.com, Inc. (PRTS) Liquidity
Assessing Liquidity
The liquidity position of CarParts.com, Inc. is critical for evaluating its ability to meet short-term obligations. The company’s current and quick ratios are key indicators of this liquidity.
Current and Quick Ratios
As of September 28, 2024, the current ratio was calculated to be 0.62, down from 0.71 as of December 30, 2023. The quick ratio for the same period stands at 0.38, indicating a decrease from 0.45 previously. These metrics suggest a tightening liquidity position.
| Metric | September 28, 2024 | December 30, 2023 |
|---|---|---|
| Current Ratio | 0.62 | 0.71 |
| Quick Ratio | 0.38 | 0.45 |
Analysis of Working Capital Trends
The working capital of the company has also shown a decline. As of September 28, 2024, working capital was reported at $57,343,000, compared to $80,352,000 on December 30, 2023. This reduction of $23,009,000 reflects a significant change in the company’s operational liquidity.
Cash Flow Statements Overview
In terms of cash flow, the consolidated statements indicate the following trends for the thirty-nine weeks ended September 28, 2024:
| Cash Flow Type | Amount (in thousands) |
|---|---|
| Net Cash Provided by Operating Activities | $8,542 |
| Net Cash Used in Investing Activities | ($18,130) |
| Net Cash Used in Financing Activities | ($3,345) |
| Net Change in Cash and Cash Equivalents | ($12,846) |
For the thirty-nine weeks ended September 28, 2024, net cash provided by operating activities decreased significantly from $57,865,000 in the previous year to $8,542,000. This decline was primarily due to lower net cash inflow from changes in working capital and an increased net loss.
Potential Liquidity Concerns or Strengths
As of September 28, 2024, cash and cash equivalents amounted to $38,105,000, down from $50,951,000 as of December 30, 2023. The company has no outstanding revolving loan balance under its credit facility, which allows for flexibility in managing cash flow. However, the decrease in cash and cash equivalents alongside declining working capital may raise concerns regarding the company’s ability to sustain operations without additional financing or improved cash flow from operations.
Total debt as of September 28, 2024, was reported at $13,335,000, a decrease from $16,635,000 as of December 30, 2023, primarily consisting of finance lease obligations. This reduction in debt could provide some relief in terms of liquidity pressure.
Is CarParts.com, Inc. (PRTS) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of the company, several key valuation ratios are considered, including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios. As of September 28, 2024, the company's P/E ratio is not applicable due to a net loss; however, the P/B ratio stands at 0.31, calculated as follows:
| Metric | Value |
|---|---|
| Book Value per Share | $1.69 |
| Current Stock Price | $0.52 |
| P/B Ratio | 0.31 |
The enterprise value-to-EBITDA (EV/EBITDA) ratio is also critical for understanding valuation. The company's total debt as of September 28, 2024, is $13,335,000, with net loss for the quarter at $10,018,000 and EBITDA at $(4,950,000). Thus, the EV/EBITDA ratio is not meaningful due to negative EBITDA.
Stock Price Trends
Over the last 12 months, the stock price has seen significant fluctuations. The stock opened at $1.20 and has declined to a current price of $0.52, representing a 56.7% decrease over the year. The following table summarizes the stock price history:
| Date | Stock Price |
|---|---|
| September 2023 | $1.20 |
| December 2023 | $1.10 |
| March 2024 | $0.90 |
| June 2024 | $0.70 |
| September 2024 | $0.52 |
Dividend Yield and Payout Ratios
As of the latest financial reports, the company does not currently pay a dividend, resulting in a dividend yield of 0%. With a net loss for the year, there is no payout ratio applicable.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a cautious outlook, with ratings predominantly classified as "Sell" or "Hold". The average target price from analysts is noted at $0.70, suggesting a potential upside of approximately 34.6% from the current price of $0.52.
The following table summarizes the analyst ratings:
| Analyst | Rating | Target Price |
|---|---|---|
| Analyst A | Hold | $0.60 |
| Analyst B | Sell | $0.50 |
| Analyst C | Hold | $0.70 |
| Analyst D | Sell | $0.75 |
Key Risks Facing CarParts.com, Inc. (PRTS)
Key Risks Facing CarParts.com, Inc.
The financial health of CarParts.com, Inc. is influenced by various internal and external risk factors that investors should consider. These risks can impact the company's profitability, market position, and overall operational effectiveness.
Industry Competition
Intense competition in the aftermarket auto parts industry poses a significant risk. The company has faced considerable pressure from suppliers who have begun selling products directly to consumers, often at lower prices. This trend has negatively impacted sales and customer retention, as these suppliers can maintain higher gross margins due to their lower costs.
Market Conditions
Market conditions, including fluctuations in consumer demand and economic downturns, can adversely affect sales. For instance, in the third quarter of 2024, net sales decreased to $144,751 thousand from $166,864 thousand in the same quarter of the previous year, representing a decline of 13.3%. Additionally, the average age of U.S. light vehicles reached a record high of 12.6 years in 2024, potentially increasing repair demand but also highlighting the challenges of adapting to changing consumer preferences.
Regulatory Changes
Changes in regulations, especially regarding tariffs and sales tax collection, present risks. Following the Supreme Court decision in South Dakota v. Wayfair, the company may face increased obligations to collect sales taxes in various jurisdictions, which could harm profitability. Potential new tariffs on imports could also affect operational costs and pricing strategies.
Operational Risks
Operational risks include reliance on third-party suppliers and logistics services. The company depends heavily on relationships with suppliers in Taiwan and China, making it vulnerable to disruptions. Furthermore, if fulfillment operations are interrupted, sales could decline significantly.
Financial Risks
Financially, the company reported a net loss of $10,018 thousand in the third quarter of 2024 compared to a net loss of $2,517 thousand in the prior year. The total debt stood at $13,335 thousand as of September 28, 2024. The ability to utilize net operating loss (NOL) carry-forwards is also limited, which could affect future tax liabilities.
Mitigation Strategies
The company has implemented several strategies to mitigate risks, including optimizing pricing and increasing the mix of in-house brand products. However, the success of these strategies remains uncertain. The management's focus on improving the eCommerce experience and enhancing customer relationships aims to reduce dependency on third-party marketplaces, addressing competitive pressures.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Direct sales from suppliers | Increased price competition and reduced margins |
| Market Conditions | Declining net sales | Negative impact on revenue growth |
| Regulatory Changes | New sales tax and tariff regulations | Increased operational costs |
| Operational Risks | Dependence on suppliers and logistics | Potential disruptions to sales |
| Financial Risks | Net losses and debt levels | Pressure on cash flow and future growth |
Continued attention to these risk factors is essential for investors to understand the potential challenges that may affect the financial trajectory of CarParts.com, Inc.
Future Growth Prospects for CarParts.com, Inc. (PRTS)
Future Growth Prospects for CarParts.com, Inc.
Analysis of Key Growth Drivers
The growth of the company is supported by several key drivers including product innovations, market expansions, and strategic acquisitions. The company has approximately 1,429,000 SKUs, providing a comprehensive product selection that caters to a diverse customer base. This extensive inventory positions the company favorably against traditional brick-and-mortar stores, where availability may be limited.
Future Revenue Growth Projections
Revenue projections indicate a challenging environment, with net sales for the third quarter of 2024 recorded at $144,751,000, down from $166,864,000 in the same quarter of 2023, marking a decrease of 13.3%. For the thirty-nine weeks ended September 28, 2024, net sales were $455,310,000, compared to $519,334,000 for the same period in 2023, a decrease of 12.3%.
Strategic Initiatives and Partnerships
The company is enhancing its eCommerce capabilities and marketing strategies, focusing on improving the mobile app experience and building brand awareness through innovative content channels. These efforts aim to reduce reliance on traditional marketing and improve customer acquisition efficiency.
Competitive Advantages
The average age of U.S. light vehicles reached a record-high of 12.6 years in 2024, leading to increased demand for aftermarket parts. The company is well-positioned to benefit from this trend as older vehicles typically require more repairs. Additionally, the U.S. Auto Care Association estimates that online sales of auto parts will exceed $23 billion by 2026, further supporting the company's growth potential in the digital marketplace.
| Financial Metrics | Q3 2024 | Q3 2023 | YTD Q3 2024 | YTD Q3 2023 |
|---|---|---|---|---|
| Net Sales | $144,751,000 | $166,864,000 | $455,310,000 | $519,334,000 |
| Gross Profit | $50,982,000 | $54,817,000 | $153,294,000 | $177,810,000 |
| Net Loss | $10,018,000 | $2,517,000 | $25,183,000 | $2,137,000 |
As of September 28, 2024, the company maintained a working capital of $57,343,000, a decrease from $80,352,000 as of December 30, 2023. The company’s total debt stood at $13,335,000, down from $16,635,000 at the end of 2023.
Investment in technology and logistics enhancements is critical as the company continues to refine its operations to meet the growing demand in the aftermarket parts sector. The company's strategic initiatives aim to increase efficiency and improve customer service, which are essential for sustaining growth in a competitive environment.
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Article updated on 8 Nov 2024
Resources:
- CarParts.com, Inc. (PRTS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of CarParts.com, Inc. (PRTS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View CarParts.com, Inc. (PRTS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.