Lithia's big DCH deal was a boon for shareholders
SHAREHOLDER VALUE

Lithia's big DCH deal was a boon for shareholders

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Lithia Motors' big acquisition last month fueled a strong second quarter for the publicly traded retailer in terms of shareholder value return.

After announcing on June 15 that it would purchase DCH Auto Group, shares of Medford, Ore.-based Lithia jumped sharply when markets reopened on Monday, June 16. For the quarter ending June 30, Lithia's shareholder value rose 41.9 percent.

That meant Lithia again led the six publicly traded new-vehicle retailers in total shareholder return for the quarter, as measured by the Automotive News/PwC Shareholder Value Index. Each retailer recorded double-digit gains from the first quarter, averaging strong 19.6 percent growth.

That's familiar territory for Lithia. Each of the last four years, it has led all public auto retailers in shareholder return during a strong period of U.S. auto sales growth. The group of six retailers is up an average of 49.3 percent over the past 12 months and has more than doubled over 36 months. But Lithia's shareholder value soared 77.9 percent in the past year and almost quintupled over three years.

While not matching the sizzling dealer gains, automakers and suppliers posted gains in shareholder value in the second quarter.

The 14 global automakers added 4.2 percent during the quarter, paced by a 20 percent return for Japan's Suzuki. Suppliers increased 2.7 percent over the same period.

Global automakers


The slower pace of shareholder value gains in the second quarter reflects investor expectations as the rate of global auto sales gradually eases during the industry's fifth year of recovery.

Automakers added an average 18.6 percent in value over the past year and 30.2 percent over three years.

Renault, Toyota and Volkswagen are all up more than half since mid-2011. At the other end of the spectrum, PSA Peugeot Citroen, Fiat S.p.A. and China's SAIC are the only automakers to lose value over three years.

Global suppliers


Financial performance for publicly owned global suppliers has been strong in recent years, with the 38-company group up 32.2 percent the past 12 months and 42.5 percent over 36 months.

The group's short-term smaller return of 2.7 percent is almost entirely because of disappointing second-quarter sales in Europe after a rally in the previous six months had raised expectations.

In the second quarter, suppliers based in Asia rose 11.5 percent and North American parts makers gained 7.1 percent. But all six public suppliers based in Europe lost value for the quarter, with France's Plastic Omnium off 13 percent.

Auto retailers


Lithia's DCH acquisition is shaking up the status quo among the half-dozen public auto retailers. All have prospered since the recession.

But the highest percent growth in shareholder return over one and three years has been at Lithia and Asbury, the two smallest operations. That may reflect low starting points post-recession more than relative performance.

When the DCH deal closes in December, Lithia will move past Asbury on units sold and its $7 billion in annual revenue will be within $2 billion of No. 3 Group 1 and No. 4 Sonic Automotive.

And Lithia CEO Bryan DeBoer says the group will stay on the acquisition trail.

You can reach Jesse Snyder at jsnyder@crain.com.


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