AutoCanada Inc. posted net earnings of $14.2 million in the second quarter, a 4.7 percent increase from the year-earlier period, as revenue grew 3.1 percent to $842.3 million, despite an “economic slowdown” in Western Canada that has put a chill on the retailer’s unit sales.
The company, based in Edmonton, Alberta, cited cost controls, as well as enhanced asset productivity, for the improved financial results, despite mixed new and used vehicle sales.
AutoCanada plans to reduce operating expenses in 2016 by $15 million.
“In addition to decreasing operating expenses we are managing our interest expense on our inventories, managing our accounts receivables and accounts payables, and considering innovative ways we can save money through shared services and central purchasing,” the company said in a statement Friday.
The company said it also reduced its five-year capital plan by 25 percent, or $48.5 million, from $193.8 million to $145.3 million, during the latest quarter. Total new-vehicle sales at Canada’s largest new-car retailer in the second quarter dipped 5.6 percent to 9,374 units while fleet sales jumped 15 percent to 2,724 units. Retail used-vehicles sales dropped 2.1 percent to 5,327 units.
Depressed oil and energy prices have led to weak economic growth and employment cuts in Canada’s western provinces, where AutoCanada’s dealerships are concentrated.
During the second quarter, AutoCanada said new-vehicle sales across Alberta decreased by 6.2 percent compared to the same quarter in 2015.
AutoCanada said it had 53 dealerships at the end of the second quarter, up from 49 at the same time last year. Only 27 of those dealerships qualified as “same-store” during the latest quarter.
On a same-store basis, new retail sales fell 16 percent to 4,361 units in the second quarter, while fleet sales rose 9 percent to 1,774 units. Used-vehicle sales dropped 6.2 percent to 2,705 units in the second quarter on a same store basis.
Same store revenue dipped 3.2 percent to $405.9 million in the second quarter.
AutoCanada also said its dealership ranks may increase.
"Our acquisition strategy will be implemented during the remainder of the year,” AutoCanada CEO Steven Landry said in a statement. “During a period of reduced economic activity, we have the ability to be opportunistic in our acquisition strategy and to focus on acquisitions that are accretive and grow our portfolio. We will diversify across Canada through the acquisition of flagship stores in major markets.”