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Profits Rise for Lithia, Group 1

July 26, 2012

Lithia Motors and Group 1 Automotive joined other major dealer groups this week in reporting significant profit gains in the second quarter, with the two organizations reporting profit gains of 38 and 20.1 percent, respectively, from the year-ago quarter.

The Medford, Ore.-based Lithia Motors reported a net income of $20.5 million for the quarter ended on June 30, up from $14.8 million, while Group 1’s net income of $29.7 million set a new company record.

"We remain focused on improving our operations and increasing our market share," said Bryan DeBoer, president and CEO. "I'm proud of the results our team delivered in the second quarter. With that said, we still have opportunities in all facets of our business and our leaders continue to identify areas where performance can improve. Additionally, in many of our western markets, the new vehicle sales recovery has lagged national levels. This factor will serve as a future catalyst for growth."

Lithia’s revenue for the second quarter totaled $847.1 million, an increase of 26 percent, or $174.6 million from 2011. The company also saw its new-vehicle same-store sales increase 34 percent, while service, body and parts same-store sales increased 7 percent.

Lithia’s F&I offices also realized substantial year-over-year sales growth, with revenue accounting for 34.3 percent of sales vs. last year’s 26.8 percent. F&I profit per retail unit also increased, rising from $992 a year ago to $1,063 in the recent reporting period. Arranged financing jumped from 73 percent last year to 76 percent in the second quarter, while service contracts penetrated at a 40 percent clip. Acceptance rates for lifetime oil and filter slid from 37 percent in the second quarter 2011 to 36 percent in the second quarter 2012.

Group 1’s revenue totaled $1.9 billion, climbing 29 percent from a year ago and setting a new record for any quarter. The company also realized an all-time record for total gross margin, which came in at 15.1 percent. That represented a 16.8 percent increase from the prior year.

The company also retailed 36.6 more new units than in the year-ago period, while retail used-vehicle unit sales surged 27.9 percent from the prior year. Additionally, new-vehicle gross profit increased 17.7 percent on 33.4 percent higher revenues, while used-vehicle gross profit increased 12.4 percent on 29.2 percent higher revenues.

Group 1’s F&I operations also reported significant gains, with gross profit per retail unit jumping $65 to a record $1,191. F&I penetration rates remained consistent with 2011, with 70 percent of sales financed. Acceptance rates for service contracts, GAP, maintenance and paint sealant came in at 37, 22 percent, 8 and 14 percent, respectively. Making the biggest difference was credit availability, which company officials said has returned to prerecession levels.

“Group 1’s record-setting second-quarter performance was driven by strong same-store revenue growth in our new and used retail segments and another record-setting quarter in finance and insurance,” said Earl J. Hesterberg, Group 1’s president and CEO. “Even with the impact of a major hailstorm that severely damaged about 2,200 units at seven of Group 1’s Oklahoma dealerships during the quarter, we outpaced the industry unit sales rate and further improved our expense leverage.”

 

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