Lithia revenue tops $1 billion for first time; Q2 profit jumps 25%
Lithia Motors Inc.'s revenue passed $1 billion for the first time in the second quarter, while net profit jumped 25 percent from the year-earlier quarter to $25.6 million, the company said today.
Revenue rose 23 percent to $1.01 billion.
"We exceeded $1.0 billion in quarterly revenue for the first time in our history," Lithia CEO Bryan DeBoer said in a statement. "Based on our results through the first six months of the year, we are well on our way towards the first milestone for growth we established late in 2012, where total revenue increases by 25 percent from full year 2012 results."
Lithia's new-vehicle retail revenue rose 25 percent from the year-earlier period to $569.5 million. Retail new-vehicle sales rose 22 percent to 17,024 units, considerably faster than the 9 percent gain for industrywide U.S. new light-vehicle sales in the quarter.
Same-store retail new-vehicle sales rose 16 percent to 16,212.
Lithia ranks No. 9 on Automotive News' list of the top 125 U.S. dealership groups. Its 2012 retail sales of new vehicles totaled 56,960.
Acquisitions driving growth
Lithia has 91 dealerships, up from 87 at the end of 2012, after acquiring three new-car dealerships in Oregon in early June that will add $110 million in estimated annual revenue.
In April, Lithia opened a Mini dealership in Anchorage, Alaska, which has estimated annual revenue of $13 million.
"We continue to seek exclusive franchises in the markets we serve and view acquisitions as one of the long-term drivers of growth for Lithia," DeBoer said in a statement.
All Lithia dealerships are west of the Mississippi; Iowa is the easternmost state with Lithia stores. DeBoer said during a conference call that it is easier for the company to find places close to its existing stores because the company knows those markets better, but stores on the East Coast are not out of the question.
"There is a flood of dealers out there -- they are a little pricy," DeBoer said. "We are pretty confident that the pipeline is full enough that those deals will come."
Last year, Lithia raised its monthly target for used-vehicle sales to 75 per store, up from 60. In the second quarter, the average was 54, up 15 percent from 47 a year earlier.
DeBoer said achieving this goal won't happen quickly, and involves "risk acceptance" from stores to buy used vehicles.
"What we know is that the facilities and locations have the ability to get to the 75 units," DeBoer said during the call.
DeBoer highlighted a need for confidence from the sales staff, belief from the management in buying used vehicles and a knowledge of how to sell those cars.
"Our goal when we go into stores is not cost cutting, it's cost optimization," Lithia CFO Chris Holzshu said during the call.
Revenue from used-vehicle retail sales rose 25 percent to $258.5 million, on a 21 percent rise in unit sales to 14,074.
DeBoer said the biggest area of opportunity in used vehicles is in those aged 3 to 7 years.
F&I revenue up 26%
Lithia's finance and insurance revenue rose 26 percent to $34.2 million. F&I gross profit was $1,100 per unit, up 4 percent from a year earlier.
Lithia's same-store revenue from service, body and parts rose 7 percent, led by a 19 percent increase in warranty revenue.
DeBoer said during the call that the biggest driver in growing Lithia's service, body and parts revenue is being able to get "new faces" in the store and keeping those customers longer.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.