Avis Budget swings to a loss as efforts to right-size fleet weighs on profits (CAR)
Avis Budget Group (NASDAQ:CAR) shares are higher as investors overlooked the steep costs associated with right-sizing the fleet of rental vehicles, focusing instead on better-than-expected revenue for Q1. To eliminate the oversupply of vehicles and cut interest costs, the company sold a record number of vehicles in a tough market for used cars.
“We took the necessary actions to get our fleet size in-line by disposing a record number of vehicles in the quarter allowing us to exit March with utilization in-line with prior year,” Avis CEO Joe Ferraro said, adding that, “The steps we have taken in the first quarter set us up well to take advantage of the peak spring and summer travel seasons.”
So, while Avis Budget (CAR) reported sales of $2.6B thanks to strong demand for travel — beating expectations by $80M — the company reported a loss of $3.21 per share versus a profit of $7.72 per share in the same quarter last year, missing expectations by 33 cents. The loss was attributed to increased vehicle interest expense of 44% and as vehicle depreciation and lease charges swelled by 140%. This resulted in total expenses increasing by 25% to $2.7B.
Other metrics were mixed as the number of rental days both international and in the U.S. increased by 5%, but the revenue per day was down 5%. Vehicle utilization was down 250 basis points to 65.9% while per-unit fleet costs per month shot up by 124%.
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