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Lithia Motors continues its record earnings roll

While stock analysts home in on 90-day performance, Lithia Motors prefers to think long term.

The analysts drummed away for an hour during Wednesday morning’s quarterly earnings conference call, with most looking for instant market gratification. Nonetheless, Lithia Motors executives made it clear they’ll continue to dance to their own cadence.

For the 31st straight quarter, Lithia hit record highs, posting its highest second quarter revenue and per share earnings in company history.

The Medford auto retailer’s revenue for the period ending June 30 soared 26 percent to $3.1 billion from $2.5 billion a year earlier, while per share net income of $2.44 rose 15 percent from $2.12 for the same period in 2017. Lithia’s profit jumped 14 percent to $61 million from $53 million.

“We were pleased with the quarter, but we would like to see higher returns,” Lithia President and CEO Bryan DeBoer said in a later interview. “We’re not here for the short term.”

The company now expects total 2018 revenue of between $11.75 billion and $12.25 billion and per share earnings of $9.50. The second quarter results came up short of what Lithia had posted in its previous guidance, and the retailer will forgo guidance beginning in 2019.

“I think our intention with the guidance is to give everyone plenty of notice,” CFO John North responded to an analyst probing about the discontinued guidance. “We typically provide our outlook for the following year in October. We did provide an outlook for the remainder of this year, and I think the idea is to try to not give anyone a heart attack in terms of a big change in our structure. ... We’re still going to continue to run the company the same way we have. We still have been focused on opportunity.”

Two thirds of Lithia’s 188 dealerships have been in the fold for four years or less. Many of those stores have high-selling, general and administrative expense rates, something market analysts abhor. Such was the case when Lithia acquired luxury auto dealerships from Prestige Group in New Jersey earlier this year.

“Ultimately, the strategies that we’ve always had in place in regard to buying strong assets that underperformed will be rewarded in the long term,” DeBoer said. “It’s just sometimes you have to make decisions like a Prestige. That’s an extremely strong asset in New Jersey that was losing a couple millions dollars a year when we bought it, and we’re turning it in. Now it’s making a little bit of money, but it took a lot of capital to invest, and those things play out a little bit differently.”

During the second quarter, Lithia added Broadway Ford in Idaho Falls, Idaho, and Buhler Ford in Eatontown, New Jersey, and divested a Mitsubishi franchise in Fresno, California. In July, Lithia opened a Chrysler Jeep Dodge location in Calallen, Texas, separated a Subaru franchise into a stand-alone facility in Utica, New York, and sold an Audi franchise in Monroeville, Pennsylvania.

Lithia is ranked No. 4 on Automotive News’ list of the top 150 dealership groups based in the U.S., with annual new-vehicle retail sales of 167,146 in 2017. When used cars are added to the equation, the retailer has an inventory of 75,000 cars available to buyers throughout the country. Of the 60 million auto sales nationally last year, more than 40 million were used. For every 100 new cars Lithia sells, it sells 80 used vehicles.

“We typically have the highest used-to-new ratio in our peer group,” DeBoer said. “With tariffs and other challenges, affordability is becoming an issue with new cars. Inventory is more important than bricks and mortar; once you control inventory, then you attract consumers with a larger selection.”

For the first six months of 2018, Lithia’s revenue improved 22 percent to $5.8 billion, compared to $4.7 billion in 2017. Per share net income for the first six months of 2018 was $4.50 compared to $4.13 in the first half of 2017.

Lithia shares dropped 10 percent to $84.64.

Lithia announced a 29-cent per share dividend payable Aug. 29 to shareholders of record on Aug. 15.

Reach reporter Greg Stiles at 541-776-4463 or gstiles@rosebudmedia.com. Follow him on Twitter at www.twitter.com/GregMTBusiness or www.facebook.com/greg.stiles.31.

From a single dealership in Ashland, Lithia Motors has grown to be a Fortune 500 company with dealerships across the country. Mail Tribune file photo
A look back at the week of June 4 to June 10, 2012. The Middleford parking garage is near capacity as Lithia Motors' headquarters nears completion across the street. Mail Tribune / Bob Pennell