Avis Budget Group (NASDAQ: CAR) shares are higher as investors overlooked the high costs associated with right-sizing the rental vehicle fleet, focusing instead on better-than-expected revenue for the first quarter. To eliminate the excess supply of vehicles and reduce interest costs, the company sold a record number of vehicles in a difficult market for used cars.
“We took steps to align our fleet size by shedding a record number of vehicles in the quarter, allowing us to exit March with utilization in line with the prior year,” said Avis CEO, Joe Ferraro, adding that “the steps we have taken in the first quarter prepared us well to take advantage of the peak spring and summer travel seasons.”
So while Avis Budget (CAR) reported sales of $2.6 billion thanks to strong travel demand (beating expectations by $80 million), 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 an increase in vehicle interest expenses of 44% as vehicle depreciation and lease charges increased by 140%. This resulted in total expenses increasing 25% to $2.7 billion.
Other metrics were mixed, as the number of both international and US rental days increased 5%, but revenue per day decreased 5%. Vehicle utilization decreased 250 basis points to 65.9%, while fleet unit costs per month soared 124%.