Editor’s Note: An earlier edition of this story distorted the profit forecast for Driveway. The right number seems now.
Lithia Motors Inc. said Wednesday that it had launched its highest adjusted net profit recorded in the quarter, a gain in an era that deserves to show the weight of the coronavirus pandemic has an effect on U.S. auto retailers.
The retailer’s net source of revenue in Medford, Oregon, increased 25.5% to $77.7 million from the previous year. The adjusted net source of revenue increased 23% to $85.5 million. The adjusted figure excludes impairment, insurance provisions and acquisition costs, partially offset through net profit in store sales and a tax benefit.
Second quarter earnings fell 14 to $2.76 billion. Lithia is the first publicly traded brokerage to report second-quarter earnings.
While retail sales of new vehicles fell by 24% in the quarter, second-hand retail sales increased to 1.5% and gross profit was consistent with a higher retail vehicle to 27%.
“Strong sequential innovations throughout the quarter, coupled with the responsiveness of our retail outlets to the existing environment, led to the highest quarterly earnings consistent with a consistent percentage in our company’s history,” Lithia CEO Bryan DeBoer said Wednesday.
Lithia shares closed Wednesday 20.5% to $210.70.
Lithia has also implemented plans for a new retail and virtual strategy under a national brand, Driveway. The tool will allow consumers to buy and sell cars online and plan a domestic service. Vehicle purchases on the site are not negotiated, the company said, and come with a seven-mile, 400-mile rollback policy. Car vehicle assessments sold on the site will also not be negotiable and donations are valid for seven days. The company is expected to succeed at $9 billion in annual revenue over five years.
Lithuania resumed its acquisition activity in July after postponing purchases so far part of the year amid the uncertainty of the pandemic. Lithia said he bought 3 dealerships this month: DCH Subaru from Thousand Oaks, California and Smolich Chrysler-Jeep-Dodge-Ram and Nissan in Bend, Oregon. Taken together, these acquisitions are expected to generate $160 million in annualized revenue.
The store plans to announce more acquisitions this year.
Lithia closed the quarter with $750 million in money and in addition to its renewable credit lines. Also this month, the company entered a line of $254.7 million syndicated revolving credits for genuine goods, leading the store to a total of $1 billion in money and credits with which to expand its geographical footprint. The company also has $250 million in unfunded genuine goods that it can use to unload money, DeBoer said.
“The acquisition market is robust and we are accelerating the build-out of our coast-to-coast network enabling us to serve customers wherever, whenever and however they desire,” DeBoer said. “Our balance sheet is in the strongest position in our company’s history and we are well-positioned to accelerate our plan to reach 5 percent national market share.”
Sales: New-vehicle retail sales fell 24 percent to 34,869 in the quarter, while used-vehicle retail sales rose 1.5 percent to 43,505. Overall sales totaled 78,374 vehicles, a drop of 12 percent from a year earlier.
Same-store sales: On a same-store basis, new-vehicle retail sales slid 27 percent to 32,461, better than the 33 percent drop in U.S. light-vehicle sales across the industry in the second quarter, according to the Automotive News Data Center. Used-vehicle retail sales fell 1.6 percent to 41,030 on a same-store basis.
Lithia is No. 3 on Automotive News’ list of the top 150 dealership groups based in the U.S., with new-vehicle retail sales of 180,532 in 2019.
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