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Automotive retailer Lithia Motors (NYSE:LAD) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 7.2% year on year to $9.18 billion. Its non-GAAP profit of $7.65 per share was 2.8% below analysts’ consensus estimates.

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Lithia (LAD) Q1 CY2025 Highlights:

• Revenue: $9.18 billion vs analyst estimates of $9.37 billion (7.2% year-on-year growth, 2.1% miss)

• Adjusted EPS: $7.65 vs analyst expectations of $7.87 (2.8% miss)

• Adjusted EBITDA: $461.4 million vs analyst estimates of $406.3 million (5% margin, 13.6% beat)

• Operating Margin: 4.4%, in line with the same quarter last year

• Free Cash Flow Margin: 2.8%, similar to the same quarter last year

• Locations: 451 at quarter end, up from 387 in the same quarter last year

• Same-Store Sales rose 2.5% year on year (-1.9% in the same quarter last year)

• Market Capitalization: $7.96 billion

StockStory’s Take

Lithia’s first quarter results reflected the impact of ongoing market changes and operational adjustments, as management pointed to growth in new vehicle sales and aftersales as key drivers. CEO Bryan DeBoer noted that the company’s omnichannel approach, which integrates digital and physical retail, has begun to yield measurable gains in engagement and unit volume, particularly in its value auto segment and financing operations. DeBoer emphasized the adaptability of Lithia’s business model, especially its ability to offer a broad range of vehicle affordability options and to navigate shifts in consumer sentiment and tariffs.

Looking forward, management highlighted a disciplined focus on operational execution and capital allocation. CFO Tina Miller discussed ongoing efforts to lower selling, general, and administrative (SG&A) costs and to optimize the financing portfolio. DeBoer also reiterated plans to pursue targeted acquisitions within the United States, while maintaining flexibility for share repurchases given current market valuations. The executive team acknowledged potential volatility from tariffs and industry consolidation but expressed confidence in Lithia’s ability to increase market share and deliver consistent profitability across its expanding footprint.

Key Insights from Management’s Remarks

Lithia’s management attributed Q1 performance to a combination of diversified product offerings, cost discipline, and the maturing of key business adjacencies. The company’s ability to adapt to tariffs and maintain operational flexibility was a recurring theme throughout the call.

• Tariff Resilience and Inventory Management: Lithia’s product mix, with about 45% of inventory unaffected by current tariffs, helped cushion the impact of supply chain disruptions. Management noted that recent inventory reductions improved cost efficiency, with new and used vehicle days’ supply falling by nearly 10 days sequentially.

• Growth in Value Auto Segment: The value auto segment, targeting affordability-conscious buyers, saw a 39% year-over-year increase in sales. DeBoer explained this segment is less sensitive to tariffs and general market fluctuations, supporting Lithia’s strategy of serving a wide range of customer needs.

• Financing Operations Expansion: The Driveway Finance subsidiary reported a significant sequential increase in loan originations and improved net interest margin. Management emphasized the importance of this adjacency, noting its higher contribution to earnings relative to traditional indirect lending.

• After-Sales and Service Strength: Aftersales gross profit rose 7.5% year over year, driven by both warranty and customer-pay work. Management highlighted the potential to further expand capacity and utilization in this high-margin business.

• SG&A Efficiency Initiatives: The company reduced SG&A as a percentage of gross profit, building on its “sixty-day plan.” Management aims for ongoing monthly improvements, driven by both personnel cost optimization and vendor consolidation, while leveraging technology upgrades like the Pinewood software system.