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Automotive retailer Lithia Motors (NYSE:LAD) fell short of analysts' expectations in Q2 CY2024, with revenue up 13.8% year on year to $9.23 billion. It made a non-GAAP profit of $7.87 per share, down from its profit of $10.91 per share in the same quarter last year.
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Lithia (LAD) Q2 CY2024 Highlights:
- Revenue: $9.23 billion vs analyst estimates of $9.28 billion (small miss)
- EPS (non-GAAP): $7.87 vs analyst estimates of $7.04 (11.8% beat)
- Gross Margin (GAAP): 15.4%, down from 16.8% in the same quarter last year
- Free Cash Flow was -$278.5 million compared to -$307.9 million in the same quarter last year
- Same-Store Sales fell 6.4% year on year (-2.9% in the same quarter last year)
- Market Capitalization: $7.57 billion
With a strong presence in the Western US, Lithia Motors (NYSE:LAD) sells a wide range of vehicles, including new and used cars, trucks, SUVs, and luxury vehicles from various manufacturers.
Vehicle RetailerBuying a vehicle is a big decision and usually the second-largest purchase behind a home for many people, so retailers that sell new and used cars try to offer selection, convenience, and customer service to shoppers. While there is online competition, especially for research and discovery, the vehicle sales market is still very fragmented and localized given the magnitude of the purchase and the logistical costs associated with moving cars over long distances. At the end of the day, a large swath of the population relies on cars to get from point A to point B, and vehicle sellers are acutely aware of this need.
Sales GrowthLithia is one of the larger companies in the consumer retail industry and benefits from economies of scale, enabling it to gain more leverage on fixed costs and offer consumers lower prices.
As you can see below, the company's annualized revenue growth rate of 22.7% over the last five years was incredible as it added more brick-and-mortar locations and expanded its reach.
This quarter, Lithia's revenue grew 13.8% year on year to $9.23 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 12.7% over the next 12 months, a deceleration from this quarter.
Same-Store SalesLithia's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 1.9% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.
In the latest quarter, Lithia's same-store sales fell 6.4% year on year. This decrease was a further deceleration from the 2.9% year-on-year decline it posted 12 months ago. We hope the business can get back on track.
Key Takeaways from Lithia's Q2 Results It was good to see Lithia beat analysts' EPS expectations this quarter. We were also glad its gross margin outperformed Wall Street's estimates. On the other hand, its revenue slightly missed. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock remained flat at $276.33 immediately following the results.
