As Lithia Motors executives detailed yet another record month on a Wednesday morning conference call with financial analysts, geography entered the discussion.
Four out of five American drivers live within 500 miles of Lithia Motors dealership and service centers, based on auto registration figures. Nonetheless, there is a gaping expanse in the Southeast and large swaths of the Midwest far from a Lithia outpost.
Sooner or later, the Medford auto retailer will make its move into the unconquered territory, but CEO Bryan DeBoer said Wednesday there is no hurry.
“Ultimately, there is still an 80 percent growth opportunity for the other (geographic) two-thirds of the country as we fill out in existing markets,” DeBoer said. “If the opportunity arises in the Southeast, we could have full coverage.”
Acquisitions have become a way of life for Lithia, now ranked No. 4 on Automotive News’ retailer list, driving top-line growth to new heights. The Medford auto retailer produced its best first quarter ever as it fended off flat same-store sales and a 2 percent decrease in new vehicle deals.
Spurred by 5 percent growth in used vehicle sales and a 3 percent pick-up in service revenue, the Medford auto retailer reported net income of $52 million, up 3 percent from $51 million a year ago. Revenue jumped 19 percent to $2.7 billion, up from $2.2 billion, while per share income grew 3 percent to $2.07 from $2.01.
“Vehicle sales improved sequentially each month of the quarter,” DeBoer told analysts during the conference call. “January and February were softer than expected, and we experienced more severe weather than typical in the Northeast throughout the quarter. Despite the slower start, we finished strong with a record March, generating over 70 percent of our earnings. We expect this momentum to continue throughout 2018 and beyond.”
How soon the Southeast or deeper infiltration into the Midwest becomes a reality, DeBoer said, depends on the numbers favoring Lithia and the availability of leaders for those markets.
“There is no plan other than in the event there is a good leadership team and the financial numbers come together,” DeBoer said. “That’s why we’re saying it will be three to five years, but I don’t know; it could happen sooner. Consumers buy and drive one car at a time. In sales and marketing technology, we’re seeing some benefits already. We’re touching most of the country already. It’s not like a key milestone or anything that’s going to make a difference in our future.”
With the stock market giving back gains from time to time, Lithia has repurchased 90,000 shares at a weighted average price of $98.02 per share so far this year. The company has approximately $154 million for additional buybacks.
But that pales in comparison to the amount the company has spent on recent acquisitions within the past two years.
Lithia bought nine dealerships from Carbone Auto Group. Last May, it acquired Pittsburgh’s Baierl Auto Group, adding its first dealerships in Pennsylvania, followed by the Day Automotive Group in suburban Pittsburgh earlier this year.
In August 2017, it bought Downtown Los Angeles Auto Group. Among its pick-ups this year are six dealerships from Prestige Family of Fine Cars in Bergen County, N.J., in one of the wealthiest areas of the nation. The company has also added dealerships in Buffalo, New York, Buhler Ford in Eatontown, New Jersey and Idaho Falls, Idaho.
All in all, Lithia expects an annual $1.4 billion in revenue from its 2018 purchases.
“We continue to expand and optimize our network of local customer service and delivery centers,” said DeBoer. “With two-thirds of the year remaining, we have nearly eclipsed the amount of revenue acquired in 2017. We see significant opportunities in the market that are more attractively priced than in the recent past.”
The company also boosted its per share dividend to 29 cents, payable May 25 to shareholders of record on May 11.
Reach reporter Greg Stiles at 541-776-4463 or firstname.lastname@example.org. Follow him on Twitter at www.twitter.com/GregMTBusiness or www.facebook.com/greg.stiles.31.