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Car sales to lose momentum in 2015, says AutoCanada

03/20/2015 02:40 EDT | Updated 05/20/2015 05:59 EDT
Auto dealership company AutoCanada has warned that the outlook for car sales in 2015 will be constrained by a cooling economy and the impact of falling oil prices.

After releasing its 2014 results, which showed record growth, Edmonton-based AutoCanada said the end of December 2014 and the first two months of 2015 presented “very challenging” conditions for auto sales.

Alberta is particularly hard hit with 40 per cent of Albertans deferring major purchases such as homes and automobiles because of the struggling oil and gas sector, the company said.

AutoCanada estimated Calgary area sales for FCA Canada (formerly Chrysler) were down 17.5 per cent, Japanese vehicle sales fell 10 per cent and sales of Korean cars plunged 33 per cent.

Consumer confidence has also been hurt in other markets as Canada’s growth outlook slows the company said. In the Maritime provinces, sales in the past two months have declined because of heavy snow.

Lower margins

 It said its dealerships were accepting lower vehicle sales margins and higher ad costs to compensate for the downturn over the last few months.

The company said it would manage costs to deal with the anticipated downturn in sales and saw opportunities ahead to snap up auto dealerships at better prices.

“Should the Western economy continue for a period at a slower pace, management anticipates that acquisition multiples for Western dealerships shall decline, thus providing more attractive buying opportunities, further enhancing long term shareholder value," the company said in its investor presentation.

AutoCanada stock fell 20 per cent to $34.14 in trading today because of the dim outlook for sales.

2014 a banner year

In 2014, the company reported a banner year with revenue up 57.2 per cent or $805.7 million to $2.2 billion from $1.4 billion in 2013.

Net income rose 30 per cent to $53.1 million or $2.30 per diluted share from $38.2 million or $1.83 per diluted share in 2013.

AutoCanada, which has 48 dealerships across Canada, saw same-store revenue, a key metric, increase by 8.9 per cent.

For the fourth quarter, revenue increased 95.8 per cent to $653.5 million and net earnings increased 48 per cent to $13.3 million or 54 cents a share. 

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