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Lithia reports $34.5 million third-quarter profit

Lithia Motors might have fallen a few hairs short of expectations in the third quarter, but the bottom line was nonetheless prolific.

The Medford-based auto retailer Thursday reported net earnings grew 11 percent to $34.5 million. Revenues jumped 21 percent to $1.3 billion with all areas of its operations delivering double-digit revenue gains.

Unadjusted per share earnings of $1.31 topped the $1.18 per share during the third quarter of 2013 when Lithia pocketed $30.9 million.

Two weeks ago, Lithia issued a warning to investors saying it would fall short of its earnings projections of $1.36 to $1.38 per share. That sent shares tumbling as Lithia stock experienced a single-day loss of $16.85 per share to $64. Since then, the stock has modestly recovered and is trading above $70.

CEO Bryan DeBoer identified used-vehicle inventory as Lithia's third-quarter problem.

"We think most of it is behind us, but we still don't know whether the market continues to soften," DeBoer said. "We're obviously on our toes, and most of our stores are ready to respond as need be. I think we ended the quarter at a 55-day supply, which was about the same as last year."

Ultimately, DeBoer said, it takes skill to acquire the right used-vehicle inventory.

"There is a very fine line between having the right cars and the wrong cars, meaning when you're trying to expand your used-car retail sales, you try things," he said. "You're not as experienced knowing what cars specifically sell. So when you have a glut of trade-ins come off of new vehicle sales, or they become more available on the used vehicle wholesaler auction areas, it's easy to take the path of least resistance and buy newer cars, later model conquest cars that are really — let's call it a sucker's bet, because it's easy to buy, it looks good, it's going to go through the shop easy, so on and so on. But those are cars that quickly are damaged when the market weakens and they are pretty readily available at competitors."

During the third quarter, Lithia's same store-sales increased 12 percent; new vehicle same-store sales increased 11 percent; used vehicle retail same-store sales increased 13 percent; service, body and parts increased 13 percent; per vehicle finance and insurance revenue climbed $97 to $1,202.

Unadjusted net income from continuing operations through the first nine months of the year was $3.58 per share, up from $2.98 in 2013.

 Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31, and read his blog at www.mailtribune.com/Economic Edge.