At some point, the synergies across both the adjacencies and the verticals, including the finance and fleet management companies, will create the benefits for customers of a full transportation provider, DeBoer added.
David Whiston, an analyst with Morningstar in Chicago, said he thinks Lithia will continue to enter new verticals for quite awhile.
“I think the object here is to find out which new verticals work, which can scale and which work within the context of being a new- and used-vehicle retailer,” Whiston said.
Lithia entered Canada in 2021, its first international market, and this year the company broached another continent when it bought Jardine Motors. Both, DeBoer said, are about growth beyond 2025.
“It is a longer-term strategy for international,” he said. “Domestically, we have good runway, up to about $60 to $70 billion in revenue, if it was purely optimized.”
A fully saturated and optimized U.S. footprint would be around 500 stores, DeBoer said, noting that such a portfolio is also something for beyond 2025. Lithia, which now has 296 U.S. dealerships, is focused on growing in the Southeast, South Central and Upper Midwest regions, he added.
Mike Sims, president of buy-sell firm Pinnacle Mergers & Acquisitions in Frisco, Texas, said there is plenty of room to grow.
“We’re still, in the scheme of things, a very fragmented industry,” he said. “They’re not reaching all parts of the country yet, which they stated they will do and they are doing.”
Morningstar’s Whiston estimates that Lithia’s revenue will reach $31.3 billion this year while he said the consensus estimate from Refinitiv is $30.3 billion. The consensus estimate increases to $32.9 billion in 2024, he said.
“It’s certainly possible the street is not modeling them at $50 billion in 2025,” Whiston said. “Personally, I believe them. They tend to do what they say they’re going to do. And then usually overdeliver, in fact.”
