Lithia Motors, Inc. (LAD) Earnings & Analysis

Latest quarter

Lithia reported Q3 FY2026 revenue of $9.9 billion, above the consensus of $9.7 billion. Adjusted earnings per share were $10.34, also above the consensus of $9.70. On a diluted basis, Lithia reported EPS of $13.22, compared with $8.61 a year earlier.

The company’s filing attributed growth in new-vehicle revenue to acquisitions, while same-store new-vehicle revenue declined as unit sales and average selling prices fell. Used retail revenue also grew, supported by acquisitions and same-store performance, although same-store used unit volume declined. Aftersales revenue rose through acquisitions and same-store activity, while finance and insurance income fell as product sales per retail vehicle declined.

Lithia’s gross margin was 15.0%, compared with 15.2% a year earlier, and its operating margin was 4.22%, down from 4.36%. The filing said higher selling, general and administrative expenses as a share of gross profit contributed to the operating-margin decline. Free cash flow was −$117.2 million, compared with −$194.7 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Bryan DeBoer said same-store revenue declined in the quarter, with fewer new vehicles sold, while used-vehicle and aftersales gross profit grew. He attributed the used-vehicle performance in part to pricing and said the company’s dynamic pricing work was supporting profitability.

Asked how stores were improving used-vehicle pricing, DeBoer said many were still learning to reach more potential buyers before accepting an early offer. He estimated that “less than a quarter of our stores” had a sales funnel efficient enough to sell their average car at market price. He said Lithia was trying to connect its broader online customer base with individual stores so they could reach buyers sooner.

On service demand, DeBoer said warranty work supported aftersales, while customer-pay revenue was flat. He told analysts that an AI appointment system in the U.K. was asking customers about additional services before their visits, and that Lithia was exploring how to accelerate some of that technology in the U.S. He also said U.K. new-vehicle units grew 10.6%, helped by expanding partnerships with Chinese manufacturers.

CFO Tina Miller said Driveway Finance originated more loans during the quarter and benefited from improving funding costs. She said Lithia was matching staffing to store volumes and combining roles where technology allowed. DeBoer said the company had “combined roles, removed layers” in its sales departments.

For capital allocation, DeBoer said Lithia repurchased $85.0 million of stock in the quarter while also funding acquisitions. He said the company acquired four Gossett stores in Memphis, adding $250.0 million in expected annualized revenue. Looking to the fourth quarter, he said inventory supply was in better shape than a year earlier and that he did not expect abnormalities in inventory.

Guidance

DeBoer said used-vehicle gross profit per unit could decline slightly from the third quarter to the fourth quarter. He also said he expected it to climb above $2,000.00 in FY2027. On expenses, DeBoer said the Pinewood rollout should finish by the end of 2028, with the drive toward SG&A below 60.0% of gross profit likely to follow the store rollout by 12 to 24 months.