How are Lithia's L2 Stores doing in Texas?

[XDCX]

I noticed that Lithia's L2 website shows that they now have two locations in Texas. Does anyone know how they're are doing?

It seems like there was a great deal of coverage on the Internet when they opened the L2 Store in Colorado but I haven't read much about their Texas Stores.

It will be interesting to see how they do. CARMAX seems to have a Business Model that works but AutoNation, by contrast, couldn't get out of the Used Car business fast enough.

I'd love to hear a L2 update from a local Texan.

[XDCX]

I just noticed that Lithia's stock got hammered again today - it closed at $12.10 - the lowest closing price in 4 1/2 years.

In fairness, the whole market is weak as fear of a recession looms.

I'd still like to know how L2 is doing. I guess I'll have to makes some phone calls and send some FAXes to see if I can get some input.

[SHACOS]

It's too early to see any real results. Give the L2 stores in Lubbuck and Amarillo time. I would assume similar results as in our Midland/Odessa stores.

[XDCX]

It's too early to see any real results. Give the L2 stores in Lubbuck and Amarillo time. I would assume similar results as in our Midland/Odessa stores.

SHACOS - Welcome to DealershipForum.com and thanks for the information.

It seems that Lithia has big plans for L2 - I'm glad to hear that they are off to a good start.

If you get a chance, please respond to our poll asking about your Predictions for 2008. (http://dealershipforum.com/forums/showthread.php?t=41) I'm really curious to see if the responses vary based on region and franchise.

Thanks again for the information and please help spread the word about our new community.

[XDCX]

This has been one of the most popular topics on DealershipForum.com based on page views but we're still not getting many opinions.

Any further thoughts on this topic?

[cbubba7]

According to everything heard over the grapevine is that L2 is starting to do well. A few management issues but to be expected with an endeavor like this. Carmax is a great company and L2 is based on their benchmarks.

[XDCX]

Chubba7 - welcome to the forum and thanks for your post.

I read the other day that Lithia has a media event planned for their Texas L2 stores - I guess that's why I hadn't read anything about them on the Internet. Perhaps they'll get some publicity after the event.

It will be interesting to see how the stores do. With the Detroit 3 cutting back on their Rental Fleet Sales it will be interesting to see what happens to the "nearly new" used car market?

Thanks again for the post and please help spread the word about DealershipForum.com.

[SHACOS]

The goal is to match L2's expansion with the number of Store in L1 (Lithia). So, anticipate serious growth within the L2 model. Problem is, Carmax will be building right where we are. It's going to be a tough fight, but we have lower overhead which should give us an advantage.

[XDCX]

SHACOS - Thanks for the post.

It seems that both Lithia and CARMAX have expansion plans for their Used Car Centers - it will be interesting to see how each company performs.

I was on Ebay the other day and noticed that a Dodge dealer was advertising a 2008 Ram for Invoice, less 100% of Holdback. And it wasn't just trucks, he'd offer that deal on any vehicle except the Viper. It seems like margins on new vehicles just keep getting tighter and tighter.

It left me wondering if that's the future of automotive retailing and whether the same thing will happen to used vehicles?

I'm sure we'll hear more details about L2 when LAD releases their earnings and has their conference call.

Thanks again for the post and have a great weekend.

[XDCX]

Given the interest in this thread I've added Lithia's stock symbol (LAD) to my watch list and occasionally monitor the stock on a Real Time Ticker.

The market was down this morning on renewed recession fears with the Dow Jones off about 2%. Lithia's stock, by contrast, was down as much as 13% at one time this morning.

Even more interesting was the spread between the Bid and the Ask - at some points the spread was 50 cents or more. I'm used to watching stocks that have spreads of just a penny or two.

Perhaps this is common for Lithia's stock - I haven't been following it that long. As I post this, LAD shares have made a nice rebound and have shaved $1 off of their $2 decline.

AutoNation reports earnings on Thursday - it will be interesting to hear their commentary on the Retail Car Business.

[SHACOS]

JP Morgan just downgraded us from Neutral to Underweight.

http://moneycentral.msn.com/inc/news/providerredir.asp?feed=AP&date=20080205&id=8142075

This analysis speaks the truth about high overhead, but there has been a centralization process in place since early last year that is bring AP, AR, Deals, Vehicle Valuation, etc in house.

I'm not sure what the other public dealers groups are doing to centralize their operations, but I like where we are heading.

[XDCX]

SHACOS - thanks for the link - that explains this morning's price decline.

I'm still mystified at this morning's spread between the Bid and the Ask - I wonder who sold this morning at $13.07? Perhaps it was a retail investor that had his Stop Loss triggered?

Concerning the report - it appears to be a valid observation, but I imagine you could also argue the reverse side of the argument. If each store has staffing for A/R, A/P, etc. then those costs are mostly fixed regardless of sales volume.

By contrast, if you have 50 people in Medford that are handling the same work and sales drop 20% it's much easier to adjust staffing to fit your sales volume. (In a retail store if you only have one person doing the work you can't cut your staffing by 20% - it's either a 0% cut or a 100% cut)

As before, it will be interesting to see what AutoNation has to say when they release their earnings and have their conference call on Thursday.

[XDCX]

AutoNation released their earnings this morning and missed expectations.

Mike Jackson, AutoNation's CEO, cited the weak housing market as the main factor and indicated that he thought the Federal Reserve still needed to make additional rate cuts. Reports indicated that 50% of AutoNations sales come from the states of California and Florida - two of the hardest hit states in the real estate meltdown.

AutoNation's stock was off about 4 - 5 % this morning and Lithia was trading up 1 - 2 %. I would have thought that LAD would be down based on AN's earnings miss.

It will be interesting to see what LAD reports later this month.

[XDCX]

I had a chance to listen to the Lithia Conference Call yesterday and was surprised how many times the Management Team referenced the L2 Stores as part of their overall plan.

Management indicated that they will open another L2 Dealership in Cedar Rapids in the Second Quarter of this year. They anticipate that they'll have between 12 - 18 L2 stores by the end of 2010.

An interesting part of the L2 concept is that all Used Car Trade-in Appraisals are performed at Lithia's "Car Center" - a central office that will handle all of the L2 appraisals. Management indicated that they plan to ramp-up the "Car Center" and one day hope to have ALL appraisals performed by the central office. (ALL means 100% of the L2 Stores and 100% of the Lithia Branded Dealerships.)

Management indicated that one of the benefits of centralized appraisal is the elimination of the Used Car Manager position at the dealerships. They're able to replace the Used Car Manager with an employee that earns 50% less, thereby lowering transaction costs and increasing profits.

As before, it will be interesting to see how the L2 stores perform.

[SHACOS]

I just sold my car through the "Sell 2 L2" program. I am biased since I work for Lithia, but it makes it a lot easier for sales people to do what they are supposed to do. SELL!!!

[XDCX]

The tone of the Stock Market has been bearish and the Auto Retailers have been getting hit hard.

Lithia's Closing Price of $9.14 appears to be an all time low.

AutoNation's Closing Price of $13.88 appears to be a Five Year low.

Hopefully Lithia's two new L2 stores will add revenues/profits so they can offset the softness in the new vehicle market.

Sonic seems to have boosted their results by focusing more attention on used cars, maybe the same strategy will work for Lithia?

[XDCX]

I just noticed that this is the first thread on DealershipForum.com to make it to two pages.

I wonder if everyone will be able to figure out how to get to the second page? :)