The data for US retail during April looks mixed for ARB. While US retail sales have been growing for 3 months, motor vehicle sales have fallen. I don’t know what impact this will be having on ARB sales in the US, but probably negative. With gas prices doubling in the US since the war in Iran began, there could also be a swing from ICE vehicles to EVs as we have seen in Australia. This could be a tough half for ARB both here and in the US. Due to the high fuel prices likely to have a short term negative impact on ARB sales, I am sitting on the sidelines for now even though the share price looks tempting.

(Not held)

AFR report (Markets Live, 15/05/2026)

“US retail sales advanced for a third month in April, pointing to some signs of consumer resilience despite sharply higher gasoline prices.

The value of retail purchases increased 0.5 per cent last month after a revised 1.6 per cent gain in March, Commerce Department data showed. Because the figures aren’t adjusted for inflation, an increase could reflect higher prices rather than more sales volumes.

Nine out of 13 categories posted increases. Sales at sporting goods stores, online merchants and electronics outlets rose in April. Motor-vehicle sales fell. Receipts at gas stations rose 2.8 per cent as the Iran war pushed gas prices to the highest levels since 2022. Spending at grocery stores also rose firmly, likely reflecting a surge in food costs in the month.

The report suggests higher-than-usual tax refunds and a stock-market rally helped provide a financial cushion against mounting inflationary pressures. However, it’s unclear how long that will sustain robust demand. Inflation-adjusted wages are declining once again and Americans are saving less.

So-called control-group sales — which feed into the government’s calculation of goods spending for quarterly gross domestic product — increased a larger-than-expected 0.5 per cent. The measure excludes food services, auto dealers, building materials stores and gasoline stations. Outside of receipts at gas stations, sales rose 0.3 per cent, the least in three months.”

There’s a lot of interest in ARB from the Strawman community recently now that the share price has fallen 54% from its twelve month high of $40.82 in August 2025 to a 6 year low of $17.61. In November 2021 ARB shares reached an all time high of $54.53

The 5 year share price chart looks tragic!

At just over $18 dollars, the share price looks cheap…but is it a bargain?

Why is ARB trading where it is?

In FY2021 the NPAT margin was 18% and ROE was 23.2%. Fast forward to FY2025 and the NPAT was 13% and ROE 12.7%. What’s in store for this year…and the future?

FY2026 consensus is for revenue of $731 million and NPAT of $86 million (EPS $1.03 per share with 83.7 million shares), making the NPAT margin 11.8%. Current equity is $734 million ($8.77 per share). Coincidently, that puts FY2026 ROE at 11.8% also. That’s half the ROE achieved in FY2021. That’s OK but not amazing. ARB’s quality metrics have deteriorated significantly over 5 years.

What about the future? What needs to change to get ARB performing again? Margins and ROE need to improve while the sales keep growing. How likely is this to happen?

Looking at the 1H2026 results it appears revenue is flat and costs have increased. One of the largest cost increases was materials and consumables which were 4.6% higher pcp. Is this likely to improve? With current inflationary pressures and higher interest rates I don’t think so.

What about sales? Sales were under pressure last half due to a challenging market for 4x4 pick up and SUV sales.

April new car sales data shows that sales are about to get a whole lot worse in 2H2026 for the category ARB is targeting.

Referring to a recent AFR article https://www.afr.com/policy/energy-and-climate/diesel-ute-sales-fall-off-a-cliff-as-fuel-prices-bite-20260505-p5ztwb

“Sales of some of Australia’s most popular diesel utes and four-wheel drives have fallen sharply as the continued spike in fuel prices prompted by the conflict in Iran pushed electric vehicle purchases to another new monthly record in April.”

“The fuel price increase is also stifling consumer interest in large diesel utes and four-wheel drives, with popular models such as Ford’s Ranger and Everest and Toyota’s HiLux and Prado all experiencing substantial falls in year-on-year sales.”

“The biggest loser was the HiLux, which had a 31 per cent drop-off in sales relative to April 2025, followed by the Everest, which lost more than 29 per cent, according to data from the Federal Chamber of Automotive Industries (FCAI) and the Electric Vehicle Council.”

“Overall sales of petrol cars in April were down 30 per cent, while diesel vehicle sales were down 21 per cent.”

My Take

When I look at ARB today, I see more headwinds than tailwinds. If I assume the operating environment does improve slightly and ARB achieves FY2027 NPAT consensus of $1.16 per share, I can calculate a rough value based on that. Using McNiven’s formula assuming equity of $8.77 per share, ROE 13.2% ($1.16/$8.77), 65% payout ratio, dividends fully franked , and requiring a ROI of 10%, I get a valuation of $16. I generally use higher required ROI than 10% so the business doesn’t excite me at the current share price. Nor does the near term for ARB with higher inflation, higher interest rates and higher fuel prices for the foreseeable future.

It’s an avoid for me until there are some signs of recovery.