Lithia Motors scores record revenue, net earnings in 4Q and 2014
Neither the integration of its largest acquisition nor West Coast port labor unrest deter Lithia Motors from capping a stellar year with record fourth-quarter revenue and earnings.
Lithia Motors Wednesday reported fourth-quarter net earnings of $41.1 million, fueled by a 75 percent ($768 million) revenue jump to $1.8 billion from $1 billion a year earlier. For all of 2014, the Medford auto retailer posted revenue of $5.4 billion and net earnings of $138.7 million — both all-time highs.
Lithia's fourth-quarter per share earnings were $1.42 per share, up from 98 cents a year earlier when it netted $25.7 million.
"We had a strong finish to 2014," said Bryan DeBoer, President and CEO told analysts during a morning conference call. "Our store leaders responded to shifting market dynamics to deliver solid results. We grew overall revenue 35 percent for the year and the DCH integration is progressing well."
The fourth-quarter surge reflected consumer confidence, continued low interest rates and lower fuel pump prices that plunged during the final three months of 2014.
DeBoer said Lithia dealerships weren't hampered by the West Coast dockworker dispute, which slowed activity in dozens of ports beginning last fall and promise to snarl transportation of goods for weeks following a tentative settlement.
"Fortunately most of our smaller market stores had a pretty good supply of inventories," DeBoer said. "Our DCH stores, which run on leaner inventories, might feel it before the rest of us. But right now it's not an issue."
He added many of the import vehicles sold by Lithia are manufactured in North America.
Have extended its holdings to 130 dealerships -- about 15 more than its pre-recessionary height -- in 14 states, Lithia has seen its stock reach new heights in the past year.
The company has 8,500 employees, including roughly 500 at its Southern Oregon dealerships and downtown Medford headquarters, representing 7-8 percent of its workforce.
"The biggest thing that comes with size is stability," DeBoer said. "We've built a stronger, more diversified community, giving more people opportunity to grow. We're not expanding our staff in Medford per se, but over time it will happen because we now have the opportunity to grow in two different size market with DCH."
Lithia landed a foothold in another major metropolitan market in January when it opened a new Subaru franchise in the Houston suburb of Clear Lake, Texas.
"It's in an under-utilized market near NASA," DeBoer said. "Typically, in a large market like New York or Los Angeles, you'll see 20 to 25 dealerships.We're the fourth dealer in the Houston market."
After purchasing DCH, giving Lithia presence on both on the Pacific and Atlantic coasts, DeBoer said geography won't dictate future acquisitions
"Geography doesn't matter any more, It's less important than from a diversification standpoint. Energy, agriculture and tourism states will all help balance our portfolio"
Lithia has built a strong capital position, DeBoer said, that will lead to more acquisitions that “perpetuate hopefully through eternity, and continue to build capital.”
He said future acquisitions will likely be a mix of one or two dealerships, with a handful of larger five to 10 dealership operations. Recent heavy snow years haven't dissuaded the company from looking at Northeast dealerships.
"As the company grows seasonal extremes like we've seen in the Northeast can be less impactful and leveled out by (holdings in) the rest of the nation. In places like northern New York and New England, it can almost be looked at like a buying opportunity, rather than avoidance.
I believe as the company grows seasonal extremes like NE can be less impactful can be leveled out by rest of nation. Usually, you're talking about a couple of days, not two weeks where it creates tension."
Lithia shares surged 4.34 percent Wednesday, picking up $3.79 to close at $93.14.
Reach reporter Greg Stiles at 541-776-4463 or firstname.lastname@example.org. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at https://www.facebook.com/greg.stiles.31, and read his blog at www.mailtribune.com/Economic Edge.