UPDATE 2-Lithia quarterly earnings drop as expenses rise
(Adds detail on sales by brand, costs, acquisition strategy, byline)
DETROIT, Feb 15 (Reuters) - Car dealership group Lithia Motors Inc. (LAD.N) posted a 47 percent decline in fourth- quarter earnings on Thursday, as higher expenses more than offset a gain in new vehicle sales.
Net income was $5.53 million, or 27 cents per share, compared with $10.49 million, or 50 cents per share, a year earlier. Revenue was up 12 percent to $735.82 million.
Fourth-quarter earnings per share from continuing operations, excluding charges for equity-based compensation and financial hedges, were 36 cents per share, compared with 50 cents per share on the same basis a year earlier.
Wall Street analysts, on average, had expected adjusted earnings of 34 cents per share, with a range of 30 cents to 36 cents, according to Reuters Estimates.
Lithia kept its 2007 earnings outlook unchanged at between $1.90 to $2.10 per share, citing new investments, higher health-care and benefit costs and a continued drag from the lagging performance of Detroit-based automakers.
Lithia shares rose about 1 percent in after-hours trading to $29.89 from $29.53 at the New York Stock Exchange close. The stock has gained about 4 percent since the start of the year.
Medford, Oregon-based Lithia, which has 104 auto dealerships in 15 states, is a major Chrysler Group retail outlet.
Chrysler DCXGn.DE accounted for 40 percent of Lithia's fourth-quarter new vehicle sales, followed by General Motors Corp. (GM.N) at 19 percent and Toyota Motor Corp. (7203.T) at 13 percent.
RELYING ON TRUCK SALES
The company's strategy of targeting rural dealerships and lower-cost franchises for U.S. auto brands has left it more reliant on sales of trucks and sport-utility vehicles, which sputtered in 2006.
But Lithia executives said stable fuel prices had driven a recent recovery in the light truck market with 72 percent of the company's sales coming from trucks and SUVs in the just-ended quarter.
"I think in reality people need these vehicles ... They're not going to go away," Lithia Chief Executive Sid DeBoer said in a conference call for analysts. "If we can keep fuel in the $3 (per gallon) range and not have it get up to $4. At $4 we would have an impact again."
Lithia's operating expenses rose 14 percent in the fourth quarter, costs executives attributed to investment in the launch of a separate line of used car stores and technology intended to reduce the time it takes to sell a car and increase the transparency of pricing for customers.
DeBoer said the goal was to make car purchases "negotiation free" and to allow sales staff at the dealerships to focus on customer satisfaction, moving other administrative tasks to the corporate level. Continued...
