The 4-wheel drive accessories business ARB has corrected 45% from its end of 2021 high and now finds itself down 29% for the financial year after witnessing a trifecta of a slowdown in sales, shortages of staff and supply chain constraints which has created a new car backlog many of whom would usually purchase ARB’s products. When we combine this with margin contraction due to rising input costs the near term picture has looked bleak for ARB which has clearly been reflected by its share price fall.
- It’s starting to feel like things are as bad as they can get for ARB.
This remains a high-quality company we like and it’s now trading on 20x FY22 earnings compared to a 5-year average of 27.5x, MM has largely avoided the Australian consumer through 2022 but this is one retailer we like into excessive weakness. A month ago we wrote that we were neutral around $33.60 but would be interested closer to $30 i.e. it’s getting very close.
MM likes under $30
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