Lithia's Q2 net rises 0.4% on used, service and parts gains
Lithia Motors Inc.’s second-quarter profit and revenue increased, mostly as a result of gains in volume of used-vehicle sales and service and parts business.
Lithia’s net income rose 0.4 percent from the year-earlier quarter to $51.4 million, the company said today. Revenue climbed 6.8 percent to $2.1 billion.
Lithia, of Medford, Ore., said it was helped by a stronger performance in all areas of the business: new-vehicle sales, used-vehicle sales, parts and service, and finance and insurance.
“Our stores delivered strong results in the quarter, growing all business lines,” said CEO Bryan DeBoer in a statement. “Our team is capitalizing on both a growing supply of used vehicles and units in operation sold over the past seven years that are now returning for service.”
DeBoer said Lithia expects U.S. new-vehicle sales to be about 17 million units annually in “the coming years.” He said in that environment Lithia will win new-vehicle market share and increase per-unit revenues in finance and insurance, which are “the key drivers to future organic growth.” It is also keeping its costs in line.
“Additionally, the increasing supply of used vehicles will drive incremental revenue opportunities,” DeBoer said. “Most importantly, a static [industry annual sales] level will spur further acquisitions as the aging dealer body seeks the optimal time to retire.”
Lithia owns 139 dealerships after its acquisition of DCH Auto Group’s 27 stores in October 2014. Previously, DeBoer had said DCH was contributing $75 million a quarter in gross profit to Lithia’s operations, or about a third of the company’s gross profit.
Gross profit rose 8.2 percent to $322 million. The smaller percentage gain in net reflected higher floorplan and other interest expenses as well as a slightly higher income-tax rate.
On a same-store basis, Lithia’s new-vehicle retail sales dipped 0.1 percent to 34,995, better than the 0.3 percent decline in total U.S. light-vehicle sales in the quarter. Its average gross profit per new-unit retailed rose 2 percent to $2,015.
Sales of used vehicles rose 9 percent to 26,778 units, but the average gross profit dropped 4.4 percent to $2,434.
Same-store total revenues rose 3.8 percent to $2.07 billion with gains in new-vehicle retail, used-vehicle retail, F&I and service, body and parts. Revenue declined in the two smallest categories: used-vehicle wholesale and fleet and other.
On an overall basis, Lithia’s retail sales in the quarter rose 6.6 percent to 63,775 units. That included 36,059 new vehicles, up 2.7 percent, and 27,716 used vehicles, up 12 percent.
The average selling price for new vehicles rose 2.4 percent to $33,529, and the average gross profit per new-vehicle retailed increased 2.3 percent to $2,021. For used vehicles, the average selling price inched up 0.9 percent to $19,976, but the gross profit per used vehicle slid 4.5 percent to $2,425.
Lithia ended the quarter with $15 million in cash, down from $23 million a year earlier. It had a total potential liquidity -- including credit facilities and real estate that is unfinanced -- of $314 million vs. $308 million a year ago.
So far this year, Lithia has completed three acquisitions, DeBoer said in an interview with Automotive News.
“But our pipeline is jam-packed and we’re pretty sure the second half of the year will be robust,” DeBoer said.
That’s in part because prices are coming down to more reasonable levels to close deals, he said.
“We’re anticipating that we should be able to complete the purchase of a dealership group as well as complete many single-point acquisitions by the end of the year,” said DeBoer.
Lithia ranks No. 5 on Automotive News’ list of the top 150 dealership groups based in the U.S., with retail sales of 137,486 new vehicles in 2015.
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.