U.S. Auto Parts Network reports Q3 sales fell 3.2%

U.S. Auto Parts Network Inc., an online provider of automotive aftermarket parts and accessories, reported Q3 sales of $36.6 million, a decrease of 3.2% from $37.8 million in the prior year period. Net loss for the third quarter ended Sept. 30, 2008, was $500,000 compared with net income of $900,000 in the prior year period.

Third quarter 2008 operating metrics included a slightly improved conversion rate, rising from 1.22% in Q3 2007 to 1.26%; a decrease in customer acquisition cost from $7 in 2007 to $6; a decrease in the number of monthly unique visitors in Q3 2008 of 4.5% from about 24.2 million to 23.1 million compared with Q3 2007; and a decrease in average ticket of 4.7% to $121 during the third quarter of 2008, from $127 in the same quarter of 2007.

“While we are dissatisfied with our performance this quarter for both sales and profitability, we did execute in some areas well. We eliminated $1 million per quarter in marketing and general and administrative expenses that will reduce our fixed operating costs going forward,” says Michael McClane, chief financial officer at U.S. Auto Parts, No. 94 in the . “We expect to continue to be negatively impacted by macroeconomic conditions in the near term and plan to use this period to continue to build out a world-class enterprise. As many of our competitors are facing liquidity concerns, U.S. Auto is well capitalized with over $33 million in cash that will enable us to not only survive, but to continue to intelligently invest in our future.”

Expenses for the third quarter of 2008 included:

• Online advertising expense was $2.5 million, or 6.8% of net sales, vs. $2.9 million, or 7.7% of net sales, for the prior year period. The decrease was attributed to improvements in the company’s return-on-investment-based spending model.
• Marketing expense, excluding advertising expense, was $2.7 million, or 7.4% of net sales, compared with $2.5 million, or 6.6% of net sales, in the prior year period, caused by higher depreciation expense.
• Technology expense was $1 million, or 2.7% of net sales, vs. $400,000, or 1.1% of net sales, in the prior year period. This increase was primarily related to increased head count as well as capitalized software development costs.
• Fulfillment expense was $2.3 million, or 6.3% of net sales, compared with $1.9 million, or 5%, in Q3 2007. The increase was attributed to higher costs in the company’s third-party distribution center in Tennessee and increased depreciation expense.
• Capital expenditure was $900,000, which included $300,000 of internally developed software and web site development costs.

For the first nine months of fiscal 2008, the company reported sales of $119.7 million, down by about 3.2% from $123.6 million in the prior year period. Net loss through three quarters of this year was $13.4 million vs. income of $1.9 million in the same period of 2007.
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