Avis Budget Group Inc. reported a narrower fourth-quarter loss on Feb. 25. But as rental car demand tumbled and vehicle values fell, results still missed Wall Street’s expectations.
Although analysts polled by Thomson Reuters had forecast a much smaller loss, Avis’ losses for the quarter ended Dec. 31 totaled $121 million, or $1.20 per share, compared with losses of $1.06 billion, or $10.16 per share, in the prior-year period. The company’s year-ago results included a $1.2 billion impairment charge.
Avis shares fell 9 cents, or 15.3 percent, and the stock has lost nearly all of its value since peaking at $18 in June. The stock traded in the $30-range in mid-2007.
As customers booked cars for fewer days and drove them less, quarterly revenue fell 9 percent to $1.26 billion, from $1.39 billion in the fourth quarter of 2007. At the same time, car fleet costs rose 11 percent, as used car market values dropped and the weak demand forced the company to reduce its fleet size.
The company’s challenging conditions in the fourth quarter included significant declines in leisure and commercial volumes and a drop in the value of used vehicles, which both contributed to sharply lower year-over-year pricing, said Chairman and Chief Executive Ronald L. Nelson.
During the quarter, Avis booked a $22 million restructuring charge after slashing 2,100 jobs. Its fourth-quarter results also included $6 million of interest expense, as well as $16 million in operating expense related to gasoline price hedges.
For the full fiscal year, losses totaled $1.12 billion, or $11.04 per share, compared with a loss of $916 million, or $8.88, in the prior year. Full-year revenue dipped slightly to $5.98 billion, from $5.99 billion in 2007.
Cost-cutting actions have included eliminating more than 2,100 positions and freezing salaries for 400 of its most senior employees. Operating conditions are expected to remain weak for at least the first half of 2009, and airlines are expected to continue to reduce capacity, resulting in fewer travelers seeking rental cars.