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Edmonton-based dealership group AutoCanada Inc. is undertaking an administration overhaul in the middle of a significant sales slump, with the company predicting conditions will get worse prior to them getting better.
The company announced that Steven Landry – who previously spent 27 years at Chrysler Group, together with a stint as president of Chrysler Canada – will require over as CEO on April 1. He will replace Tom Orysiuk, who’ll stay on as president. Company founder Pat Priestner leaves his executive chairman position to become non-executive chairman, one step towards retirement in 2017.
The shuffle comes as the company struggles through one of the most challenging periods in the 20-year history. Almost half of AutoCanada’s dealerships are in Alberta, where vehicles sales go right into a tailspin along with the cost of oil.
In the fourth quarter, the company reported an internet loss of $7.4 million or $0.29 per share. Same-store revenue fell 12.1 percent and same-store sales of recent vehicles plunged 21 percent.
The company said it expects 2016 to become even “more challenging than last year.”
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In a current note, Scotiabank analyst Anthony Zicha said his conversations with dealers suggest sales in the Calgary area fell 10 to 25 per cent within the first couple of months of this year.
“Although we are not by measure pleased by these results, trust me, it was not deficiencies in effort,” Priestner said on a business call Friday.
“(The drop in oil prices) has led to a substantial rise in unemployment, a lessening in consumer confidence along with a greater difficulty in consumers obtaining automotive loans, specifically in Alberta.”
To cope, AutoCanada is working to cut its annualized operating costs by $15 million.
The company’s shares fell 6 percent Friday to $18.00.
The only savior in the quarter was a 16.5 per cent begin used vehicle sales and a 2.6 percent increase in parts, service and collision repair revenue as consumers opted to purchase used cars or hold onto their old ones a little longer.
Overall, revenue rose 2.6 percent to $672.3 million due in large part towards the company’s aggressive acquisition strategy, which has seen it add 23 new dealerships over the past two years.
Priestner declined to state how many dealerships he expects to get this season, but said the company has the ability to do deals without making use of debt or equity markets.
However, he said he’ll only do acquisitions at the right price and that he isn’t seeing a big drop in valuations in Alberta, regardless of the weak economy.
“The dealers in Alberta know how great this market continues to be for probably 20 or 30 years, and a lot of options are just hanging on, saying, ‘Hey, we can afford a lousy year, this is actually the best spot in Canada to possess dealerships,'” Priester said.
“That’s been a bit surprising to me but in some ways I suppose it shows that the dealerships are very good, valuable assets because otherwise they’d be trading for under they are.”
