LKQ Suspends Strategic Review and Specialty Sale as Europe Weighs on Third Quarter

LKQ said Thursday its board has suspended the strategic review of the auto parts distributor, including the sale process for its Specialty segment, as it reported a third-quarter net loss driven by impairment charges and a sharp drop in profit in Europe.

The board made the decision to give the company's new leadership team a chance to conduct a comprehensive assessment of the business and evaluate the full range of value-creation pathways, according to an 8-K filed Thursday that included the earnings release. LKQ said on Oct. 23 that it had appointed Salvatore "Sal" Abbate, the former CEO of Veritiv, as president and CEO effective Dec. 15, and that it was withdrawing its full-year 2026 guidance.

Revenue and earnings fall

Third-quarter revenue fell 5.1% to $3.3 billion from $3.5 billion a year earlier. Parts and services organic revenue declined 5.4%, and foreign exchange rates cut revenue by 0.7%.

LKQ posted a net loss from continuing operations of $24 million, or 9 cents a diluted share, including $111 million of pre-tax non-cash impairment charges. That compared with net income of $178 million, or 69 cents a share, a year earlier. Adjusted diluted EPS fell to $0.50 from $0.84.

"Our recent financial and operating performance has not reflected the strength of the business or met the standards we expect, particularly in Europe," Chairman John Mendel said in the release. He pointed to the new CEO, leadership changes in Europe and the engagement of Alvarez & Marsal as steps to improve execution.

Europe drags

Europe segment revenue fell to $1.453 billion from $1.620 billion, and Segment EBITDA dropped to $68 million, a 4.6% margin, from $162 million, or 10.0%, a year earlier. Chief Financial Officer Rick Galloway attributed the weakness to operational issues related to the ERP implementation in Germany and volume declines in the United Kingdom and Benelux.

North America revenue slipped to $1.402 billion from $1.423 billion, while Segment EBITDA rose to $203 million, a 14.4% margin. Galloway said the segment performed in line with expectations despite a softer demand environment. Specialty revenue rose to $465 million, but Segment EBITDA fell to $25 million from $34 million, and Galloway said the unit was modestly below plan.

Cash flow and shareholder returns

Cash flow from operations was $411 million in the quarter and free cash flow was $372 million. At Sept. 30, total debt stood at $3.7 billion, and leverage as defined in its credit facility was 2.8 times EBITDA.

LKQ spent $30 million to buy back 1.2 million shares in the quarter and paid $76 million in dividends. It had $1.5 billion remaining on its repurchase authorization at Sept. 30, and the board on Oct. 25 extended the program by two years, through Oct. 25, 2028. On Oct. 27, the board declared a quarterly dividend of 30 cents a share, payable Dec. 3 to holders of record on Nov. 19.

By the numbers

• $3.3 billion: third-quarter revenue, down 5.1%
• $0.50: adjusted diluted EPS, down from $0.84
• $111 million: pre-tax non-cash impairment charges
• $68 million: Europe Segment EBITDA, down from $162 million
• $372 million: third-quarter free cash flow

Sources

1. LKQ Form 8-K with third-quarter 2026 earnings release (Exhibit 99.1) and strategic review suspension (Item 8.01), filed Oct. 29, 2026 (accession 0001065696-26-000050)

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