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LKQ Optimistic Amid Recession Questions

A picture of LKQ President Dominick Zarcone

LKQ Corporation, NTP-Stag’s parent company, reported lower earnings during 2022’s third quarter, but President and CEO Dominick Zarcone said long-term trends appear favorable.

“I want to thank our global teams for delivering another quarter of strong performance in a challenging macro environment, including commodities and foreign exchange volatility, as well as other inflationary pressures that impacted our reported earnings,” Zarcone said.

Revenue for the third quarter was $3.1 billion, a 5.9% decrease as compared to $3.3 billion in the third quarter last year. Net income for the quarter was $261 million as compared to $284 million for the same period in 2021.

During a conference call discussing the earnings release, Zarcone said supply chain logistics are one of the biggest challenges for the company, and those roadblocks include rail carriers and truckers. Third-party experts expect these challenges will continue into 2023’s first six months.

Although LKQ’s Specialty Vehicles division’s organic parts and services revenue continued to decline 9.1% in the quarter, acquisitions had a 6.6% positive impact on revenue growth.

While fielding a question about a recession, Zarcone said unit sales are not exclusively tied to revenue. There are products such as hitches that directly correlate to new RV purchases; however, consumables and replacement products, also drive profits. He said campground use is at record levels and is driving replacement product consumption.

“There is going to be a little bit of a ying and a yang if a recession really does hit. During recessionary times, folks reallocate their vacation dollars and would tend to shy away from getting on a plane and flying to Disney World and look for more cost-effective ways to vacation with their families,” he said. “Camping is a cost-effective way of doing that.”

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