AutoCanada, one of Canada's biggest public dealership group, recently declared that they saw a $4.1 million loss during the first quarter of this year. Part of this loss is due to increased operating costs within the United States. In the same period of time in 2018 the company had an income of $4.8 million.
Around a year ago ,AutoCanada purchased nine stores from the Grossinger Auto Group of Chicago, marking the company's first venture into the vast US car retail market.
The company's Q1 revenue went up by nearly 20% and gross profit was up around 16%. Operating expenses also went up about 28%.
“A large contributor to the increase was the addition of the U.S. Operations as operating expenses in the U.S. Operations amounted to $21.0 million in the current period,” the company stated.
Operating costs within the United States were more than the profits of $7.2 million and costs for operating in Canada were around $1.3 million.
"We have designed a go forward plan for our U.S. operations focusing on reducing the operating expenses in our U.S. dealerships and optimizing our U.S. portfolio with a view to creating a sustainable platform in the U.S.” Executive Chair Paul Anthony said in a statement.
As the first quarter ended AutoCanada has 66 dealerships, offering 27 different brands of cars, across eight provinces in Canada, and the group of nine stores in the US.
The company's new car sales went up by 20% and used car sales were up nearly 25% when compared to sales during Q1 in the previous year.
AutoCanada did express some concerns and potential problems that the company may face.
“Higher rates will adversely impact borrowing expenses on variable interest rate debt such as vehicle floorplan financing, which would increase our costs,” the company said. “Monthly loan payments for new and used vehicles are also typically linked to market interest rates, meaning rising interest rates will likely make vehicle ownership less affordable at the same time as other household debt becomes more expensive.”
As for sales, the market is coming out of record sales years.
“The sale of new vehicles is beginning to trend downwards,” AutoCanada warned. “Over the last few months, there has been greater concern over the strength of the economy in both Canada and the United States. If these concerns materialize, the volume of vehicle sales could decrease more than analysts expect.”
The company does still expect to see growth “by making accretive acquisitions as opportunities may arise.”