DETROIT -- Two of the nation’s leading automotive retail groups posted mixed third-quarter financial results today despite higher vehicle sales and revenue gains.
Asbury Automotive Group said third-quarter profits slipped slightly to $12.3 million from $12.5 million, despite a 5 percent rise in revenue to $1.1 billion.
Lithia Motors Inc. -- helped by a 29 percent surge in revenue to $737.9 million -- said third-quarter net income jumped 69 percent to $16.6 million.
Asbury CEO Craig Monaghan said the company was “significantly impacted by a limited supply of Japanese-branded new vehicle inventory.”
“We continued to aggressively strengthen our balance sheet by paying down debt in order to improve our flexibility and better prepare the company for future growth,” Monaghan said in a statement.
While Toyota Motor Corp. and Honda Motor Co. have resumed normal output following the March earthquake in Japan, car and truck supplies remain below historic averages.
Asbury, the nation’s sixth-largest dealership group, said gross profits from new vehicle sales rose 12 percent to $40 million, despite a 5 percent drop in new vehicle unit sales.
Gross profits on used vehicle climbed 4 percent to $24.6 million on a 17 percent rise in unit sales of used vehicles.
Growth despite low inventory
Monaghan said the profit growth came despite shortages in Japanese-brand inventory. Higher vehicle prices and increased finance and insurance profits were major contributors, he said.
Asbury’s Japanese-brand inventories hit their lowest levels ever for the retailer during the third quarter, COO Michael Kearney said.
As the shortages boosted prices customers paid, gross profit per new vehicle rose 18 percent on a same-store basis to $2,304. Vehicle supplies hit their lowest points in August for Honda and Acura and in late July for Toyota, but inventories are recovering, Kearney said.
“As the supply of Japanese-branded vehicles continues to improve over the fourth quarter, vehicle margins could come under pressure, especially if manufacturer incentives stay at current levels,” Kearney said.
Despite that expected pressure, Kearney said Asbury store managers will work hard to retain some of the gains in vehicle pricing.
Disciplined, controlling costs
Lithia said new vehicle same store sales rose 28 percent, and used vehicle same store sales advanced 14 percent.
“As we remain disciplined on controlling costs, incremental operating leverage demonstrates the earnings power of our company,” Sid DeBoer, chairman and CEO of Lithia, said in a statement.
Lithia, the ninth-largest dealership group, purchased a Subaru and Mitsubishi store in Fresno, Calif., earlier this month, making for a purchase total of six stores this year.
It also sold a Volkswagen store in Thornton, Colo., a suburb of Denver, just last week.
“We grew new vehicle same store sales 28 percent, well above the national average,” Bryan DeBoer, president and COO, said in a statement. “Our import stores grew new unit sales volume two percent, despite shortage of import brand new vehicle inventory.”
Lithia expects its total revenues to range between $2.6 billion and $2.7 billion this year.