Lithia Motors Inc. posted a $1.3 million profit in the first quarter, the dealership groups first quarterly profit since the fourth quarter of 2007.
The net income, which benefited from a $2.7 million gain from selling and closing dealerships, compares with a $2.2 million net loss in the first quarter of 2008.
First-quarter income from continuing operations amounted to $192,000 after taxes, down from $222,000 in the year-earlier period.
Chrysler LLC vehicles made up 36.7 percent of Lithias unit sales in the quarter, including sales at discontinued operations. The Detroit automaker is surviving on $4 billion from the U.S. government and is expected to file for Chapter 11 bankruptcy protection today.
Fellow loan recipient General Motors vehicles made up 14.9 percent of Lithias sales, including at discontinued operations. GM said this week it would cut its dealer ranks by about half by 2014 from its current 6,246, including about 1,000 next year. But Lithia executives said Wednesday in a conference call the majority of its franchises would outlast an automaker reorganization, Stephens Inc. analyst Rick Nelson said in a research note.
We think Lithias secondary market locations provide advantages over the metro markets where dealer downsizing will be most dramatic, Nelson said. Even so, there remains much uncertainty about the future of these OEMs and the impact on Lithia.
Lithias revenue totaled $397.8 million, a 29.9 percent drop from the first quarter of 2008. New-vehicle sales plunged 40.8 percent, compared with a 38.4 percent fall industrywide. Profit margins on new vehicles increased to 8.7 percent from 7.8 percent in the first quarter of 2008.
Despite the declining revenue base and decreasing same-store sales, we were able to improve gross margins in each of our business lines and continue to reduce costs, CEO Sid DeBoer said yesterday in a statement announcing Lithias results.
In June, the dealership group identified 31 stores for divestiture. The company has since disposed of 20, DeBoer said. On April 15, the company said it had closed or sold six stores this year, including four Chrysler outlets and one Saturn store.
This year the company expects to save more than $55 million in operating costs from its continuing operations, DeBoer said. Thats up from the $43 million in annual savings the dealership group announced in mid-March. The company predicts it can be profitable with U.S. light-vehicle sales selling at a 9 million-unit annual rate, Nelson said. The sales rate was 9.3 million units in March, and analysts are predicting a 9.8 million rate for April.
Lithia was compliant with all banking agreements at the end of March.
As of yesterday, Lithia had $6.9 million in outstanding convertible notes due in May. Cash and available credit total $52 million, DeBoer said.
Lithia ranks No. 8 on the Automotive News list of the top 125 U.S. dealership groups, with sales of 46,725 new vehicles in 2008. It sells 27 brands at 91 stores in 13 states.