AutoCanada Inc. earnings declined by roughly 30 per cent in the third quarter of 2023, despite a small increase in revenue and what the company’s Executive Chairman Paul Antony described as a “surprisingly resilient” vehicle market.
The Edmonton-based group that owns 65 new-car stores in Canada and 18 in the United States posted third-quarter revenue of $1.66 billion Nov. 9, up 2.1 per cent from the same period a year earlier.
Diluted earnings came in at 81 cents per share, a 30.2 per cent decline from $1.16 per share recorded in the third quarter of 2022. AutoCanada cited higher interest rates, which translated into higher floorplan costs, for the slide.
The tighter margins contrasted with a vehicle sales environment that’s remained robust despite consumers facing high vehicle prices and elevated interest rates compared to recent years.
“Demand is still up, and it’s surprising. Everything is still holding steady,” Antony told analysts on the company’s earnings call Nov. 9.
Antony said pent-up demand from the tight inventories created by the pandemic and chip shortage continue to encourage sales as “consumers need transportation.”
Alongside its quarterly earnings, AutoCanada also rolled out a new five-year strategic plan dubbed Project Elevate.
The focus of the plan, Antony said, is on maximizing dealership gross profit and cost structure over the next two years, factors that will “unlock” the opportunity to carry out further acquisitions.
“We believe that an attractive buying opportunity will present itself as valuation expectations for private dealerships start to compress over the next 18 to 24 months, and we plan to be ready.”
While AutoCanada is “not in acquisition mode right now,” the strategic plan targets adding an average of between 10 and 15 stores annually over the next five years.
The company’s shares were down about 18 per cent in midday trading Nov. 9 following the earnings call.
