Lithia's earnings soar to record level

Many small and medium-sized communities where Lithia Motors operates in the West have yet to rally to pre-recession levels.

That should be an obstacle to profitability, yet the Medford auto retailer has seen double-digit revenue growth in many of its areas. That growth pushed its second-quarter net income to a 39 percent increase, far beyond what analysts had predicted.

The company reported the record earnings Wednesday, even as Chief Executive Officer and President Bryan DeBoer rattled off a series of markets where economic recovery is still lodged on the ground floor.

"It's fair to say everything in the West is depressed at similar levels, including Southern Oregon and Oregon," DeBoer said. "That's other than Alaska and I really don't consider Alaska part of the West."

While major metropolitan areas — where Lithia has limited activity — such as the San Francisco Bay Area, Portland and Seattle have bounced back, the hinterlands are months or years behind.

"In many of our Western markets, the new vehicle sales recovery has lagged national levels," said DeBoer, whose 85 stores are spread across 11 states.

"We're looking at it as the number of years for recovery, rather than months. Things don't recover as quickly as they decline and that took a number of years. Roseburg and Klamath Falls have been pretty severely hit and are recovering slower than areas with diverse economies. Portland has Nike and Intel and Seattle has Amazon, Starbucks and Microsoft; recovery is easier when you have that kind of diversity."

The good news for Lithia is that energy-rich states such as Texas, North Dakota and Alaska have recovered enough to significantly boost auto sales while other areas slowly get back on their feet.

Once that happens, it "will serve as a future catalyst for growth," DeBoer said. "For now, we're focusing on market share."

Propelled by a 33 percent burst in new vehicle sales and consumers' desire for more fuel efficiency, Lithia's earnings blew past analysts expectations in the second quarter, with net income of $20.5 million, or 78 cents per share, up from $14.7 million, or 55 cents per share a year ago. The per share earnings were the highest for a second quarter in Lithia's 16-year history as a publicly traded company.

Thomson Reuters's poll of seven analysts had anticipated Lithia would earn 63 cents per share for the quarter, excluding one-time items. Lithia's revenue jumped 16 percent to $847.1 million, up from $672.5 million in the comparable period.

During a morning conference call with analysts, DeBoer talked about opportunities for Lithia east of the Mississippi River, something that moved to the back burner when the company hit the skids in 2008 and rapidly sold off or shuttered about 15 percent of its dealerships.

Other than a two-year period when Lithia owned a dealership in La Cross, Wis., the company's holdings have been west of the Mississippi.

But DeBoer, who succeeded his father Sid as CEO this spring, indicated Lithia is again eyeing investments in distant time zones.

"The most important thing to us is getting into rural, regional markets," DeBoer said. "To me, it doesn't matter if I have to fly another hour, and to our team it doesn't matter as much as if we are able to leverage what Lithia knows best within small regional markets. It's better to expand east of the Mississippi in markets we understand than to expand into markets west of the Mississippi that aren't us; we're going to find some opportunities out there."

For every dollar Lithia generates, more than a quarter now comes from Texas dealerships. Oregon accounts for 20 percent, while California generates just more than 10 percent and Washington just under 10 percent.

"I'm not concerned we have 25 percent coming in from Texas," DeBoer said. "It has a business-friendly consumer base, good housing prices and 4 to 5 percent unemployment, making it difficult to find technicians. But a dominant dealer in a market can attract people."

Lithia, the nation's ninth-largest retailer, announced a 10 cent per share dividend, payable Aug. 24 to stockholders of record on Aug. 10.

Lithia shares rose 8.8 percent Wednesday, closing at $26.98.

Reach reporter Greg Stiles at 541-776-4463 or email

Share This Story