Toronto, Ontario — In this weekly Tuesday Ticker, we look into AutoCanada’s decision to shutter more than half of its RightRide used vehicle sales and service locations. At the same time, Stellantis issues an altered profit guidance amid industry oversupply.
Restructuring RightRide
AutoCanada is restructuring its RightRide division, closing seven locations—more than half of the segment’s 13 stores—as part of an overall “strategic shift to optimize operations and reduce leverage.”
The move is part of the dealership group’s response to a weak Q2 2024 performance, where the company reported a net loss of $33.1 million. AutoCanada Executive Chairman Paul Antony said he is “committed to making the necessary changes to stabilize the company and eventually put us back on the path to profitable growth.”
“To position our business for sustained profitability, we have made the difficult decision to close select underperforming RightRide stores,” said Antony. “By focusing on our profitable locations and returning to our original strategy, we are confident that the operational efficiency and profitability of our remaining stores will improve.
The six remaining RightRide locations have been shifted to an “inventory-light” model and “re-focused on the original strategy to provide credit solutions to credit-challenged used light vehicle customers.”
During the Q2 2024 earnings call, Antony said that the COVID-19 pandemic had caused RightRide to stray from its core mission when used car demand was at its peak.
Discontinued RightRide operations generated $34.9 million in sales during the trailing 12-month period ending June 30, 2024, said AutoCanada in a press release. Closure of these locations is expected to be immediately accretive to Adjusted EBITDA and earnings-per-share.
On Sept. 10, AutoCanada announced the completion of a strategic divestiture of two Stellantis stores in Alberta, which “aligns with the company’s commitment to improve profitability and reduce leverage,” wrote the company in a press release.
Stellantis slashes predictions
Stellantis has cut its full-year forecast, citing “competitive dynamics [that] have intensified due to both rising industry supply as well as increased Chinese competition.”
The OEM expects to finish the year with a negative cash flow of 5 billion euros to 10 billion euros, instead of positive.
Stellantis also said it was pursuing efforts to turn U.S. operations around, including balancing dealer inventory levels to no more than 300,000 vehicles by the end of the year, instead of by Q1 2025 as originally planned.
The automaker also dropped its operating profit margin guidance to 5.5 percent to seven percent, down from double-digit estimates.
Shares of Stellantis dropped nearly 15 percent following the news. As of Monday at 1 p.m. ET, shares of Stellantis traded at 12.41 euros per share, down 41.42 percent year-to-date.
