CORRECTION: An earlier version of the headline on this story inaccurately characterized AutoCanada’s first-quarter performance. The company posted a $4.1-million net loss in the first quarter of 2019.
AutoCanada, the country’s largest publicly traded dealership group, posted a $4.1-million net loss in the first quarter of 2019, due in large part to rising operating costs in the United States, the company said.
During the same quarter of 2018, the company posted a net income of $4.8 million.
About a year ago, AutoCanada bought nine of the 10 stores in the Grossinger Auto Group of Chicago, establishing its presence in the lucrative U.S. auto retail market.
Total first-quarter revenue in 2019 was up 19.2 per cent to $739.4 million, and gross profit was up 16.1 per cent to $126.7 million.
Operating expenses were $122.8 million, up 28.2 per cent or $27.0 million from the same period last year.
“A large contributor to the increase was the addition of the U.S. Operations as operating expenses in the U.S. Operations amounted to $21.0 million in the current period,” the company said in a statement.
Operating expenses in the United States exceeded gross profit by $7.2 million. In addition, the Canadian operating expenses include approximately $1.3 million of management transition costs.
"We have designed a go forward plan for our U.S. operations focusing on reducing the operating expenses in our U.S. dealerships and optimizing our U.S. portfolio with a view to creating a sustainable platform in the U.S,” Executive Chair Paul Anthony said in a statement.
The retailer had 66 franchised dealerships, comprised of 27 brands, in eight provinces in Canada as well as the group in Illinois at the end of the first quarter.
Total new-vehicle sales, which included 1,511 U.S. retail sales, were 8,002, up 20.1 per cent. Used-vehicle sales stood at 5,650, up 24.8 per cent compared with the same quarter last year, and included 889 in the United States.
In its forward-looking statement, AutoCanada expressed concern about potentially higher interest rates and a downward trend in sales.
“Higher rates will adversely impact borrowing expenses on variable interest rate debt such as vehicle floorplan financing, which would increase our costs,” the company said. “Monthly loan payments for new and used vehicles are also typically linked to market interest rates, meaning rising interest rates will likely make vehicle ownership less affordable at the same time as other household debt becomes more expensive.”
When it comes to sales, the industry is coming off several record-setting or near-record years in terms of sales.
“The sale of new vehicles is beginning to trend downwards,” AutoCanada warned. “Over the last few months, there has been greater concern over the strength of the economy in both Canada and the United States. If these concerns materialize, the volume of vehicle sales could decrease more than analysts expect.”
Still, the company said it expects to grow its business “by making accretive acquisitions as opportunities may arise.”