Summary
Barclays adjusted its outlook for a range of auto retailers prior to the release of first quarter 2026 results, citing a larger-than-anticipated drop in U.S. auto sales, disruption to Parts & Service activity from winter storms, and potential spillovers from tensions in the Middle East. While the bank trimmed estimates broadly, it lifted its near-term forecast for one online retailer after fresh volume data outperformed expectations.
Macro picture and dealer-level changes
The bank reported that U.S. auto sales fell 5.3% year-over-year in the first quarter, a steeper decline than Barclays had modeled previously. Barclays had been projecting an average decline of 3.8% across the dealer group, meaning the actual sales trend came in weaker than its prior dealer-level assumptions.
Barclays also reduced its expectations for Parts & Service growth across dealers by 50 to 200 basis points. That downgrade reflects the effect of severe winter storms in January and February, although the bank still expects Parts & Service to remain positive in the low-to-mid single-digit range.
To account for lower new-vehicle volumes, Barclays raised projected selling, general and administrative (SG&A) to gross profit ratios across the dealer universe. The bank additionally noted that dealer share prices weakened through the quarter and that companies in the sector likely engaged in share buybacks during that period.
Company-specific notes
Carvana (NYSE:CVNA) received a lift to its first quarter projection after Barclays’ Data Science team tracked a substantial year-over-year increase in volumes. Measured volumes were up 37.4% year-over-year, ahead of the bank’s prior expectation of a 23.5% increase. Barclays also nudged its Retail GPU forecast for Carvana modestly higher.
CarMax (NYSE:KMX) volumes were tracking down 1.9% for the company’s fiscal fourth quarter ended in February according to Barclays’ latest data. CarMax is scheduled to report its quarterly results on April 14.
Barclays trimmed its fiscal third-quarter estimate for Copart (NASDAQ:CPRT) in light of possible impacts from tensions in the Middle East. The bank highlighted that roughly 39% of Copart’s U.S. vehicle sales went to international buyers in fiscal 2025, and that more than 28% of all used passenger vehicle exports were destined for the Middle East, leaving the company exposed to geopolitical disruptions.
Rising fuel costs were also called out as a potential headwind. Barclays said the sharp increase in fuel prices could have a modest impact on several firms, including LKQ (NASDAQ:LKQ), Carvana, CarMax and Openlane (NYSE:KAR). However, the bank added that the overall exposure and the timing of fuel price moves should limit the size of those effects.
Takeaways
Barclays’ revisions reflect a mix of demand softness, weather-related operational disruption, and geopolitical risk that is unevenly distributed across the auto retail and related sectors. One online retailer saw its outlook improved by stronger-than-expected delivery volumes, but dealers more broadly face margin pressure as SG&A ratios are expected to rise amid weaker new-vehicle sales.
Key points
- U.S. auto sales fell 5.3% year-over-year in Q1, compared with Barclays’ prior dealer-average forecast of a 3.8% decline.
- Parts & Service growth estimates were reduced by 50-200 basis points due to winter storms, though low-to-mid single-digit positive growth is still expected.
- Barclays raised SG&A to gross profit ratios across dealers to reflect softer new-vehicle volumes; dealer buybacks likely occurred amid Q1 stock weakness.
Risks and uncertainties
- Geopolitical tensions in the Middle East could materially reduce volumes for export-dependent businesses, notably affecting Copart given its significant international sales exposure.
- Weather-related disruptions, such as the January-February winter storms, can depress Parts & Service growth and weigh on dealer revenue and margin trends.
- Rising fuel costs may modestly affect costs and volumes for companies like LKQ, Carvana, CarMax and Openlane, although Barclays expects limited overall impact due to exposure and timing.