Zipcar earnings not zippy enough

Will the car-sharing service be the victim of its own success?

By Jonathan Berr Aug 3, 2012 11:37AM
Image: Frustrated woman driving car © Jose Luis Pelaez Inc/Blend Images/Getty ImagesZipcar (ZIP) shares were falling off a cliff Friday -- tumbling 36% near noon -- as investors fled the car-sharing service after it reported worse-than-expected results and slashed its earnings outlook.

The company reported a net loss in the last quarter of $422,000, or 1 cent a share, narrower than the year-ago net loss of $5.6 million, or 17 cents a share. Revenue surged 15% to $70.8 million as Zipcar launched new services in Chicago, Austin and Toronto. Total members rose 21% to more than 731,000 at the end of the last quarter, which lagged the company's expectations. Analysts had expected a break-even quarter on revenue of $73.06 million.

Wall Street has been pessimistic about Zipcar for a while. Not only is it facing heightened competition from larger rivals like Enterprise Holdings and Hertz Global Holdings (HRTZ), the two largest car rental companies, along with some automakers, but there is evidence that business in its existing markets has reached saturation. For one thing, usage revenue per vehicle per day in the quarter was unchanged at $65 versus the year-ago period. Another worrisome trend is that selling, general and administrative expenses increased to 27.2% of revenue from 23.9% in the same period last year. During Thursday's earnings conference call, CEO Scott Griffith tried to put a positive spin on the results.

"While we were disappointed with our recent revenue performance and faced near-term challenges of driving member acquisition, we believe we're taking the steps necessary to improve our growth trajectory and we remain very excited about our long-term prospects," he said.

Unfortunately, that's easier said than done. Zipcar expects third-quarter revenue to be between $74 million and $77 million, lagging analysts' expectations of $81.5 million. Going forward, Zipcar "will be rolling out initiatives to accelerate adoption and expand our service offerings."  That means great deals for consumers and more pressure on Zipcar's margins. The faltering economic recovery isn't helping matters either.

Zipcar will struggle in the coming months to avoid being a victim of its own success.

Jonathan Berr does not own shares of the listed companies. Follow him on Twitter@jdberr.
Aug 3, 2012 1:58PM
How about a Zipwife. Maybe in the future.
Aug 3, 2012 1:57PM

Well I don't know where they are getting the job growth,(wishful thinking on their part), but I think it is just another excuse for the speculators to and the oil companies to make the price of gas go up. BUT, they can't make the American people drive more, as a matter of fact they are driving less by the reports.

Its just because labor day will soon be just around the corner and the oil companies and the speculators can't stand to see the price of gas and oil down when they can gouge the people and make millions and billions by the lame  excuses they give. Bought and paid for politicians let them and the feds give them our money and then we have to pay the price again for it.

Its all a bunch of hockey!

Aug 3, 2012 2:04PM

They say the job growth is up 4 percent , but when it went down 75% to start with then it  has a long , long way to go , don'tcha think?

And why should that have anything to do with oil prices?

Aug 3, 2012 3:51PM
Zipcar is a good idea in most cities, but it is too pricey, given alternatives including special weekend rentals from Enterprise and others.  The question is whether it can make a decent profit at a lower price point.  Part of the problem is the time wasted in getting to/from the rental locations.
Aug 3, 2012 1:26PM
Who uses Zipcar?  Sounds flaky to me.
Aug 3, 2012 1:32PM

As i said before, not until Obama is defected in in Nov. will our economy show any improvement !

Aug 3, 2012 2:09PM

Tell me American Patriot, do you think the president is a muslim?  Do you think global warming is a liberal hoax?  Do you think you can reduce the deficit by lowering taxes?

I have some land in Arizona you may be interested in. 

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