Automotive retailer Lithia Motors (NYSE:LAD) missed analysts' expectations in Q4 FY2023, with revenue up 9.8% year on year to $7.67 billion. It made a non-GAAP profit of $8.24 per share, down from its profit of $9.05 per share in the same quarter last year.
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Lithia (LAD) Q4 FY2023 Highlights:
- Revenue: $7.67 billion vs analyst estimates of $7.95 billion (3.5% miss)
- EPS (non-GAAP): $8.24 vs analyst estimates of $8.22 (small beat)
- Free Cash Flow was -$361.7 million compared to -$185.9 million in the same quarter last year
- Gross Margin (GAAP): 16.4%, down from 17.9% in the same quarter last year
- Same-Store Sales were down 2% year on year
- Market Capitalization: $8.21 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 25.1% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was incredible .
This quarter, Lithia's revenue grew 9.8% year on year to $7.67 billion, missing Wall Street's expectations. Looking ahead, Wall Street expects sales to grow 17.8% over the next 12 months, an acceleration from this quarter.
Same-Store SalesA company's same-store sales growth shows the year-on-year change in sales for its brick-and-mortar stores that have been open for at least a year, give or take, and e-commerce platform. This is a key performance indicator for retailers because it measures organic growth and demand.
Lithia's demand within its existing stores has barely increased over the last eight quarters. On average, the company's same-store sales growth has been flat.
In the latest quarter, Lithia's same-store sales fell 2% year on year. This decline was a reversal from the 0.8% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.
Key Takeaways from Lithia's Q4 Results It was good to see Lithia beat analysts' gross margin expectations this quarter. That stood out as a positive in these results. On the other hand, its revenue unfortunately missed analysts' expectations and same store sales fell. Overall, this was a mediocre quarter for Lithia. The company is down 1.2% on the results and currently trades at $295.35 per share.