AutoCanada (TSE:ACQ) outlined the impact of a challenging automotive retail environment and execution issues tied to a major restructuring effort as it reported fourth-quarter 2025 results. CEO and interim CFO Samuel Cochrane said the company made “one of the most comprehensive transformations” in its history during 2025, aimed at resetting its cost structure and simplifying operations, but acknowledged that store-level execution suffered late in the year.
Market backdrop and operational disruption
Cochrane said fourth-quarter demand was affected by earlier “pull-forward” activity, as tariff-related policy changes boosted demand in the first half of 2025. He also said the sunset of Canadian EV tax credits created a difficult comparison to a strong fourth quarter in 2024 and contributed to softer store traffic. Affordability pressures continued to weigh on consumers, while increased vehicle availability and normalized pricing pressured gross profit per unit (GPU) across new and used vehicles industrywide.
Fourth-quarter results: revenue and profitability down year-over-year
For the fourth quarter, AutoCanada reported revenue from continuing operations of CAD 1.1 billion, down 11.8% year-over-year, primarily due to lower new and used vehicle volumes. Gross profit declined 19.5% to CAD 174 million.
Normalized operating expenses declined 13.2% to CAD 131.5 million versus the fourth quarter of 2024, which Cochrane said partially offset market dynamics and operational disruptions. Adjusted EBITDA from continuing operations was CAD 32.7 million, compared with CAD 54.4 million a year earlier. Cochrane attributed roughly 80% of the adjusted EBITDA decline to operational disruptions and 20% to market dynamics.
Full-year 2025: cost reset lifts adjusted EBITDA despite lower sales
For the full year, AutoCanada said sales fell 7.1% to CAD 4.9 billion, and gross profit declined 10.4% to CAD 785 million. Despite that, adjusted EBITDA increased to CAD 198 million, up 11.5% year-over-year, which management said reflected the structural cost reset and continued strength in the collision business.
Cochrane said the company reached CAD 115 million in annual run-rate cost savings by year-end, materially lowering its operating cost base. However, he said the company’s most challenging issue late in the year was execution at the store level as organizational changes were implemented. AutoCanada underperformed the market by roughly 19 percentage points in new retail unit volumes in the third quarter, improving to about 10 percentage points in the fourth quarter, with further improvement continuing into the first quarter as execution issues are addressed.
Used vehicle strategy reset and expectations for margin recovery
In the Q&A, Cochrane provided more detail on used-vehicle performance, saying the used GPU decline reflected inventory purchasing decisions made ahead of reductions in marketing spend and dealership headcount. That mismatch led to elevated levels of aged inventory entering 2026.
Management expects used-vehicle GPUs to remain pressured near-term, improving progressively through the year:
- Q1 2026: used GPUs expected to remain tight
- Q2 2026: slight improvement
- Q3 and Q4 2026: “fully normalize,” with the second half expected to return to normal used GPUs
Cochrane said the company has hired a new COO, Feld, who started in January, and is leading a “full used vehicle strategy reset.” Actions described on the call included a pricing reset to align more accurately with the market, store-level “mix analysis,” and a “buy box” strategy for each rooftop. Cochrane also said AutoCanada has turned AutoTrader back on across all stores and is implementing minimum margin expectations on used-vehicle acquisitions. He said these changes are designed to improve inventory turns, reduce price-to-market gaps, and stabilize front-end margin.
Cochrane also discussed a provision related to aged new units, saying it was brand-specific and associated with harder-to-move older new vehicles, potentially including EVs. He characterized it as a one-time item in the quarter and referenced broader OEM write-offs related to EV strategies.
Collision and parts and service: hail comparison and staffing turnover
Asked about collision repair results, Cochrane said 2024 included a major hail storm that supported results, while 2025 had a lighter hail season, pressuring collision top-line comparisons.
On parts and service, Cochrane tied weakness to the execution of cost reductions, saying overly broad implementation contributed to “unacceptable levels” of turnover in parts and service staff, leading to lost knowledge and requiring general managers to rebuild teams. He said these issues have been addressed and that improvements have already started.
Looking to 2026, Cochrane reiterated five priorities:
- Stabilize and improve the automotive retail business
- Pursue disciplined inorganic growth in collision
- Improve support from the head office/store support center
- Strengthen recruitment and retention of top operational leaders
- Maintain a lean, efficient cost structure
On timing, Cochrane said investors should expect to see momentum building over the next six to nine months, while a fuller view of normalized performance could take 12 to 18 months. He added that the first quarter would remain challenged as the company works through problem inventory, with improvement expected later in the second quarter and performance closer to the market by the third quarter as GPUs recover.
On the balance sheet, AutoCanada expects leverage to remain around 4x net funded debt to bank EBITDA in the near term as it completes final U.S. dealership sales and improves earnings. Cochrane said the company continues to expect total proceeds of about CAD 130 million from exiting the U.S. portfolio, including approximately CAD 81 million not yet received and expected in 2026, with proceeds to be used to reduce debt and strengthen the balance sheet.
About AutoCanada (TSE:ACQ)
AutoCanada Inc operates car dealerships in Canada. The company offers new and used vehicles, spare parts, maintenance services, and customer financing. AutoCanada retails brands such as Chrysler, Dodge, Jeep, Ram, Cadillac, Chevrolet, Buick, GMC, Audi, Volkswagen, BMW, Mini, Infiniti, Nissan, Hyundai, Kia, Fiat, Mitsubishi, and Subaru. The majority of revenue is generated in the new-vehicles sales segment.
