AutoCanada Inc. CEO Steve Landry says aggressive incentives and luxury vehicles are the main reasons why his dealership group reported a third-quarter gross profit of $138 million, up 12.2 per cent.
“Well-planned OEM programs on particular products created successful alignment for our dealership sales. As we were rolling into the 2018 model year, the OEMs were beefing up incentives on 2017 models,” Landry said on an earnings conference call Friday.
New-vehicle sales at AutoCanada, one of the nation’s largest dealership groups, rose 9.4 per cent from a year earlier to 12,014 units. Revenue from new vehicle sales jumped 12 per cent to $497.7 million.
Sales nationwide, in the meantime, rose 6.8 per cent. Canadian dealers are on pace to deliver a record two million new vehicles this year.
“The outlook for 2018 is also very positive,” Landry said. “As we roll into 2018, what we’re hearing from industry experts is that 2018 will likely be a high of 1.95 million [vehicles sold]. We see 2018 as a fairly strong market.”
The company also reported an increase in revenue and net earnings last quarter.
CFO Chris Burrows said sales were up in every region of the country and from all but two brands.
“Our operations are becoming more efficient, and we are seeing a steady rebalancing of our portfolio, across geographies and brands,” he said in a statement.
Adjusted earnings of $13.58 million marked a 31.5 per cent rise over the same period a year earlier. Revenue jumped 10.8 per cent to $834.6 million.
Landry said luxury and imported vehicles are generating high returns.
“We’ve had a nice shift this year in our revenue from domestic, going from 64 per cent to 57 per cent, meaning luxury and imports are actually increasing,” he said.
The Montreal-area Mercedes dealership that AutoCanada bought in April “is a smaller volume luxury store but provides more revenue,” Landry said.
“We continue to look for our business to diversify,” he said.
The company also posted gains in other areas.
Parts, service and collision repair generated $104.8 million of revenue in the third quarter, up 9.7 per cent. The company increased its number of service bays to 898 from 977 a year earlier.
Finance and insurance generated $39.6 million of revenue in the third quarter, an improvement of 18 per cent from 2016
SAME STORE BREAKDOWN
Of AutoCanada’s 57 dealerships, 48 of them qualified as “same-store” during the latest quarter, up from 33 the year before. AutoCanada defines “same store” as a franchised automobile dealership that has been owned for at least two full years since acquisition. The dealership is then included in the same-store analysis in each following quarter.
On a same-store basis, new retail sales grew 7.4 per cent to $373.75 million. The number of new retail vehicles sold was 8,779, up 6.5 per cent. New fleet vehicle sales were down 12.7 per cent to $60 million. The number of fleet vehicles sold was down 18.4 per cent to 1,634.