Motorcar Parts of America (NASDAQ:MPAA) reported a dip in third-quarter revenue on Monday, as a major customer’s store closures and distribution center consolidations created a temporary headwind for the automotive aftermarket supplier.
The Torrance, California-based company posted net sales of $167.7 million for the fiscal quarter ended Dec. 31, 2025, down from $186.2 million in the prior-year period.
The decline was almost entirely attributed to a single large customer whose internal restructuring led to a $17 million reduction in orders.
This volume shift also pressured profitability, with gross profit falling to $32.9 million and gross margin contracting to 19.6% from 24.1% a year ago.
Despite the top-line pressure, management struck an optimistic tone, noting that sales to the impacted customer have already begun to rebound in the current fourth quarter.
"We are seeing a sequential improvement in gross margin, and we expect this trajectory to continue as ordering activity normalizes," said CEO Selwyn Joffe.
The company’s focus on balance sheet health provided a bright spot, as interest expenses fell by $3.5 million to $10.9 million, driven by lower debt balances and favorable interest rates.
Net income for the quarter stood at $1.8 million, or $0.09 per diluted share, down slightly from $2.3 million a year earlier.
For the nine-month period, however, MPAA remains in a significantly stronger position than last year, posting a net income of $2.7 million compared to a staggering $18.7 million loss in the same period of 2024.
With a reduced full-year sales outlook of $750 million to $760 million, the company is leaning on its dominant position in non-discretionary replacement parts and its growing Mexico-based manufacturing footprint to drive a recovery in the final months of the fiscal year.