Motorpoint warns car sales will drop as inflation bites

Motorpoint warns of impending drop in car sales as inflationary pressures bite and household budgets come under pressure

  • Motorpoint expects its car sales to fall this year as discretionary income falls
  • But the used and nearly-new vehicle retailer saw sales and profit rise last year 

Motorpoint has warned that its sales are set to fall this year amid ongoing supply chain woes, rising costs and pressure on household budgets.  

The car retailer said consumers were under ‘increasing pressure’ to cut discretionary spending after inflation hit a 40-year high in the UK.

Motorpoint said: ‘The impacts of rising inflation and worldwide vehicle supply chain challenges are likely to continue to affect our markets and all industry participants.

Warning: Motorpoint has warned that its sales look set to fall this year amid surging inflation

‘In general, rising inflation is putting increasing pressure on discretionary spending power and consumer sentiment, and this position has worsened since the start of our new financial year. This is very likely to reduce overall sales and transactions in our markets.’

It added: ‘Further, supply chain shortages will continue to limit new car production in the near term, which in turn constrains the supply of used cars that fit our nearly new criteria. The precise extent to which these factors will impact consumer behaviour and our markets is increasingly difficult to predict.’

While warning about the outlook for the year ahead, Motorpoint also published a strong set of annual results today.

The group saw its pre-tax profit surge 121.6 per cent to £21.5million, while gross profit was 70.1 per cent higher at £106.3million, and operating profit jumped 98.4 per cent to £25million.

Basic earnings per share rose from 8.4p in the year ending 31 March 2021 to 18.7p at the same time a year later.

Revenues rose by 83.3 per cent to £1.32billlion, amid vehicle price inflation and market share growth.

The group said website traffic jumped by 15 per cent year-on-year, with ‘improvements across a full range of online marketing metrics’.

On the dividend front, the group said: ‘No dividend was paid in the period (FY21: £Nil) and the Board has not recommended a final dividend (FY21: £Nil) while it focuses on driving significant growth.’ 

Motorpoint shares fell today, and were down 6.87 per cent or 15.50p to around 210.00p this morning.  

Mark Carpenter, chief executive of Motorpoint, said: ‘Motorpoint is a unique business with world class capabilities and knowledge in the used car ecosystem. 

‘We have always successfully adapted our business to meet every challenge and remain profitable since our inception 24 years ago. I am extremely pleased with the progress we have made on our medium term strategic objectives and am convinced Motorpoint will be a winner in these rapidly evolving markets.

‘We are building a market leader with a disciplined operating culture, and we are confident in the plan we laid out a year ago. Despite the ongoing uncertainty, we will continue to invest in our business with the consumer front of mind, in order to realise our long term ambition of increased market share through price leadership, while remaining profitable.’

He added: ‘We have achieved significant growth and market share gains in the year; our price leadership, strong customer service and focus on maintaining a highly engaged team will continue to substantially grow the business in the years ahead.’