Genuine Parts quarterly profit falls as higher costs hit margins

Genuine Parts Company (GPC) operates its global automotive business under the NAPA Auto Parts banner. (Photo credit: GPC)

Auto parts distributor Genuine Parts on Tuesday reported a fall in first-quarter profit as higher expenses in the broader industry weighed on its margins despite steady demand.

Rising labor costs, continued freight and logistics pressures, as well as increased prices of raw materials and energy have driven up expenses across the automotive parts industry.

The war in Iran has also curbed discretionary spending among cash-strapped consumers, with higher gasoline prices prompting some buyers to consider electric or more fuel-efficient vehicles.

However, the Middle East conflict has not materially affected Genuine Parts’ business, a company executive said in March, citing its limited exposure to oil and gas activity and steady, maintenance-driven demand in its industrial segment.

Shares of the Atlanta-based company slid nearly 1% in premarket trading following the results.

It posted net income of $189 million, or $1.37 per share, for the first quarter, compared with $194 million, or $1.40 per share, from a year earlier.

Genuine Parts’ international auto parts segment reported core operating profit margin of 9.1%, down 80 basis points from a year ago.

The company’s quarterly revenue rose 6.8% to $6.26 billion, beating analysts’ average estimate of $6.17 billion, according to data compiled by LSEG.

Total operating expenses for the first quarter were up 8.9% to $2.05 billion.

Genuine Parts reiterated its annual adjusted profit forecast of $7.50 to $8 per share.

The company said in February it would split into two companies as its automotive and industrial businesses could be worth more separately.

The move followed months of engagement with activist investor Elliott Investment Management, which had been urging the auto-parts distributor to improve operations and margins.

Reporting by Apratim Sarkar; Editing by Shreya Biswas