Automotive

Lithia Q2 profits up despite new-vehicle sales drop

Lithia also rolled out plans for a new digital retail and service strategy under a national brand, Driveway. The tool will allow consumers to buy and sell vehicles online and schedule at-home service. Vehicle purchases through the site are negotiation-free, the company said, and come with a seven-day, 400-mile return policy. Vehicle valuations for cars sold on the site will also be haggle-free and offers are good for seven days. The venture is expected to generate $50 billion in revenue for the retailer over the next five years.

Lithia resumed acquisition activity in July after putting a hold on purchasing until the second half of the year amid uncertainty during the pandemic. Lithia said it purchased three dealerships this month: DCH Subaru of Thousand Oaks in California and Smolich Chrysler-Jeep-Dodge-Ram and Nissan locations in Bend, Ore. Together, these acquisitions are expected to generate $160 million in annualized revenue.

The retailer expects to announce 11 more acquisitions this year.

Lithia closed the second quarter with $750 million in cash and room in its revolving credit lines. Also this month, the company closed on a $254.7 million syndicated real estate revolving line of credit, bringing the retailer to a total of $1 billion in cash and credit with which to expand its geographic footprint. The company also has $250 million in unfinanced real estate it could tap for liquidity, DeBoer said.

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“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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