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Internet Retailer US Auto Parts Reports $5 Million Net Loss for 2018

A dispute with U.S. Customs and Border Protection and a drop in its website traffic hurt the company’s top and bottom lines.

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For U.S. Auto Parts, 2018 was a year of “setbacks,” in the words of CEO Lev Peker.

A dispute with U.S. Customs and Border Protection and a drop in its website traffic hurt the company’s top and bottom lines. The Carson, California-based internet retailer reported net sales of $289.5 million for full-year 2018, down from $303.4 million 2017. The company reported a net loss of $4.9 million for the year, down from net income of $24.6 million in 2017.

In the fourth quarter, net sales were $64.6 million, down from $68.5 million in fourth-quarter 2017. The company attributed the decline to a number of factors, including a decrease in sales with one of its channel partners, lower online traffic – 16.5 million unique visitors, down from 20.1 million visitors in Q4 2017 – and lower in-stock rates resulting from its spat with U.S. Customs.

“Over the last 18 months, the company has certainly not performed to its full potential, and the financial results have been disappointing to everyone,” Peker said during the company’s March 7 conference call.

U.S. Auto Parts reported it spent $5 million on “port and carrier fees” and legal costs stemming from its dispute with U.S. Customs and Border Protection in 2018. The agency had been holding some of the company’s shipping containers at the Port of Norfolk based on allegations that U.S. Auto Parts had imported some counterfeit grilles.

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In April, U.S. Auto Parts filed a lawsuit against the Department of Homeland Security in the U.S. Court of International Trade seeking relief from a $9 million bond that Customs imposed on the company for the grilles. In November, Judge Jennifer Choe-Groves dismissed the lawsuit, noting that the Port of Norfolk had released all containers to U.S. Auto Parts by August.

The company has stopped importing goods through the Port of Norfolk, according to the lawsuit.

Of the “setbacks” that Peker talked about during the conference call, the spat with U.S. Customs and Border Protection was “largely out of the company’s control,” he said. However, other setbacks were self-inflicted, according to Peker, who rejoined the company in January to replace former CEO Aaron Coleman. Previously, Peker served in various managerial positions at U.S. Auto Parts from 2008 to 2014.

“I believe the struggles from our e-commerce channels have largely been internally driven issues as opposed to structural business challenges,” Peker said. “In fact, in just over two months since rejoining the company, we have already identified multiple opportunities designed to revitalize our e-commerce channel and return U.S. Auto Parts to profitable revenue growth. This will require a reallocation of resources and incremental investments in personnel, technology and new marketing strategies in 2019.”

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Among the steps the company has taken this year, U.S. Auto Parts has hired a new chief marketing officer – Houman Akhavan – “who has begun to build a world-class marketing team,” according to Peker. The company also has begun to assemble a “user-experience and analytics team.”

When Peker returned to U.S. Auto Parts in January, he conducted a review of the company’s operations, which revealed that a “lack of focus” was one of the company’s “internal missteps.” He attributed the problem to “spreading our resources too thin.”

“In order to focus the team and to deploy our assets most efficiently, we are in the process of reducing the number of websites we operate,” Peker said. “This will allow for a more simplified development approach, more focused marketing and real attention to user experience.”

Peker emphasized the need for the company to make technology investments that modernize the back end and front end of its e-commerce platforms and restructure its “data and catalog methodologies to enhance the discovery of products.”

“Our technology organization is focused on ensuring that our customers receive the same experience they have come to expect from the best e-commerce players, regardless of vertical,” he said. “Customers’ expectations today are shaped not just by our direct competitors, but by all of their experiences on the web, and we have to ensure that we deliver the same or better. This includes site speed, discovery of product, ease of checkout and post-purchase experience, including setting the proper expectations for shipping times. Transparency and accuracy will always lead to a better customer experience and increase the likelihood of a repeat customer.”

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