Los Angeles Business Journal

Wider Loss at U.S. Auto Parts Network Prompts Share Sell-Off

By Deborah Crowe Friday, March 2, 2012

Shares of U.S. Auto Parts Network Inc. sank nearly 20 percent Friday morning after the online provider of aftermarket automotive parts reported a larger fourth quarter loss and an analyst downgraded shares.

The Carson company late Thursday reported a net loss of $7 million (-23 cents a share) compared with a net loss of $2.9 million (-10 cents) in the same period a year earlier. Net sales fell 4 percent to $77.2 million.

The company took a $3.4 million non-cash write-down of intangibles for the value of the trade name of J.C. Whitney, a competitor it acquired in 2010. Excluding one-time items, the company had an adjusted loss of 12 cents a share.

Analysts surveyed by Thomson Reuters on average expected the company to report an adjusted loss of 4 cents a share on revenue of $77.6 million

The company’s average order value fell to $115, compared with $122 in the same period a year earlier. The gross margin fell 330 basis points to 30.8 percent of net sales. The company contributed the declines to increased competition in the online retail marketplace, necessitating more promotional pricing. Higher freight costs also hurt.

U.S. Auto Parts bought Whitney for $27.5 million, plus about $11 million in debt, in a deal that was wide praised at the time. But integrating the Chicago company’s operations and inventory took much longer than expected and dragged down financial results for several quarters. In the third quarter, U.S. Auto Parts took a $3.8 million charge related to integration costs.

"Although 2011 was a challenging year, we believe the foundation laid during this period will set U.S. Auto Parts up to compete in 2012 and beyond," Chief Executive Shane Evangelist said in a statement.

But analyst Jared Schram at Roth Capital cut his recommendation on the company’s stock from “buy” to “neutral,” and lowered the 12-month target price to $5 a share.

The stock was down 98 cents, or 20 percent, to $3.97 in midday trading on the Nasdaq.