Lithia Ready For Tariffs, Carvana Expand Recon Ops, Chipotle Forced Smiles

Paul J Daly  0:01  
Good morning. It is Thursday. Thursday today. Yes, April 24 This is the automotive State of the Union. I'm Paul Jay Daly's Kyle mounts. Here we're gonna hear what Brian DeBoer thinks about tariffs. Talk about carvana's new EV pickup truck and their new reconditioning center. And we're gonna talk about Chipotle mandatory saying you gotta smile when customers come in.

Kyle Mountsier  0:22  
I'm gonna challenge Nathan. Challenge Nathan to see if he can get Sebastian malchenko, Maniscalco. Maniscalco, I can't ever get his last name right. Chipotle skit pulled up by the time we get to that Nathan

Unknown Speaker  0:40  
walk, he's that trainer. Am I gonna grab this thing? Yeah,

Paul J Daly  0:48  
definitely one of the skits ever, one of the best skits ever. We'll get to that. We'll get to that when we get to it. All gall eyes on a sodu con right now, we have just a slew of dealer registrations coming tomorrow, and they keep coming in ASOTU CON, presented by Reynolds and Reynolds and goo goo. It's our big event of the year. We have so many speakers and sessions lined up on the hot topics right now. AI used vehicle acquisition, inventory, strategy, leadership and culture, F and I, compliance technology, new products, new faces, put it, put that graphic up, whatever you have,

Kyle Mountsier  1:26  
it just looks everything. Oh, my gosh. Oh, this is gonna be that'll be sorry about this session. Great one. Go ahead, yeah. I mean, here's the thing. Well, first of all, I mean, Trent and Dan on this, and then Derek Hanson, like, this is going to be a great conversation,

Paul J Daly  1:42  
right? And Dan banister, for the people just listening, not watching, yeah. So when,

Kyle Mountsier  1:47  
when we think about the fact that there's so much consolidation, we're actually going to talk about this in the first story today. There's so much consolidation in the industry, and the big question is, is it more efficient? And can I get more efficiency in my operations, when I have growing rooftop counts, I'm trying to figure out what the corporate structure is. How I leverage, you know, group size, operations for efficiency. Is it possible? What do I do? How do I make that happen? I I've actually, I know a store, a group right now that is adding two stores today, trying to figure out how to go from 13 to 15. It's like, do I get more efficient, or do I just get revenue? Oh,

Paul J Daly  2:29  
that's the question. We're gonna answer that in that session. Look go to ASOTU con.com, look at the agenda. Look at the detailed agenda. You'll see all the sessions there. There's definitely something for you. It's still very easy to fly in and out of the Washington, DC area as a whole. This is in Hanover, Maryland, just a little south of the BWI Airport, just a little north of all the other DC airports. So real easy to get to, amazing time. We hope you register. Go check out the site and find something you like. All right. Talk about news. Let's get to it. Look while terrorists are looming over the industry. Lithium motors leaning into its diversified strategy, and they are breaking financial records as they do so. CEO Brian DeBoer, super smart and savvy dealer, says the dealership giant is uniquely positioned to ride out this current storm. Roughly 45% of their inventory is not impacted by tariffs, providing a significant buffer. Company did post a $9.2 billion in revenue, up 7.2% year over year, and $211 million in net income, their which is up 28% water over year. Lithias emphasis on affordability, including older used vehicles. Take a note there. Smart strategy has strengthened its market position, while prices parts prices are going up. Deborah stressed the importance of matching pricing with competitors like Jiffy Lube and Auto Zone, while offering both OEM and aftermarket parts. De Boer said during a call quote with tariffs, we sit quite nicely, and this is probably the most diversified and least impacted of all the major retailers, sounds pretty confident to

Kyle Mountsier  4:06  
me. Look at that level of scale that they've acquired over the last two and a half years, it's hard to think that they wouldn't be resilient in this type of atmosphere. I still think it's kind of wild that it's only 45% is unaffected by tariffs. It just it shows how broad reaching if 55% of the inventory is somehow affected, whether it's by parts or by direct, you know, impact because of new car import tariffs. But this is the big story to me, and I alluded to it as we were talking about ASOTU CON, is if you're up $9.2 billion in q1 revenue, meaning gross revenue, which is 7.2% but you're up 211 point 2 million in net income, up 28% that, I mean, I haven't looked at the stock price yet. We should look it up. But that right there to an investor is. Insane, because that's where all the dividends, that's where things come out of that's where your opportunity to go deeper into R and D, to hire for efficiency, to scale technology for efficiency, that's literally a 4x multiple on what the impact to the bottom line is, which means they are actually finding efficiency in scale. Absolutely.

Paul J Daly  5:20  
Look, I think that a lot of the a lot of the things like you talked about before this is that dealer groups considering, do we get the money? Do we try to diversify more? I think the diversification strategy has helped every one who deployed it. In the last several instances we've had of disruption, whether that was inventory, whether that was pandemic, it's always a good strategy. And, you know, obviously Lithia just a behemoth because of the way they've been executing that strategy over the last decade. So there you go. Give us something to look at, something to think about, but I specifically like the older used car model. Like, that's the real used car business, right? Yeah. That's like a rental car business. And it's

Kyle Mountsier  6:00  
affordability, our business affordability, right there? Yeah, absolutely.

Paul J Daly  6:02  
And you know, a lot of people who deploy that strategy do a great job at owning the entire garage, right because, oh, you have a new driver that needs a car. You have a kid that needs a car for college, you start to provide the full solution for a family's driveway throughout the entire life cycle. And it sounds like they're doing it, speaking of doing it, stop. Yo, keeps swinging. They're expanding their operational footprint in a big way, bringing inspection and reconditioning services to its Colorado Springs Odessa auction site, marking its eighth national mega site. The new mega site in Fountain Colorado spans 50 acres, supporting both retail recon. Oh, it does retail recon as well, and wholesale auction needs and will create 100 new jobs. Oh, it doesn't mean like retail it means like, vehicles are going to retail, not retail services. Yeah. First I was like, wait a minute, people can go in here and get recounts. No, that's, I'm sorry that's not enough for a second. Yeah, yeah, to the retail units, yes, with the added capacity, they can offer more inventory and speed up delivery in that market and surrounding markets more efficiently. This is Brian Boyd, Senior Vice President of inventory, said that integration will bring a wider selection of vehicles with quick shipping times to local customers and provide a more robust offering for local wholesale customers. I can tell you this centralized reconditioning is the way to leverage a regionalized

Kyle Mountsier  7:23  
dealer group, and Carvana is planting these massive reconditioning facilities in locales where they have a lot of impact. You see eight mega sites in cities that are centrally located among some of their like highest level volume areas, yep. And this is where, like, you know, if you have a group that is growing in size, and we can talk about this a lot, I think you know, if you have any, if you want to know who's doing it actually, Joel Bassam will be at ASOTU CON, and you should ask him to talk to you, right? You know, 13, I think 13 or 14 locations. Now, a couple new car locations, mainly used car locations, but they centralize their reconditioning and merchandising facilities, and their time to live for retail is so much quicker, which means they can increase turn and increase profitability. And you see that with Carvana and them being able to pay more for vehicles because they know that they can get that vehicle front line ready and in a retail merchandise, you know, perspective for consumers a lot quicker than anyone else, which means they don't have to worry about 6090, day issues when it comes to discounting, right? And so like leveraging centralized reconditioning, we're looking, we've, we've taken so much from Carvana over the last 13 years. As an industry, this is something that we should pick up, without a

Paul J Daly  8:43  
doubt. Also a fun part of the story is that they announced their new EV delivery truck. Oh yeah, little bit different, little thing right there. Speaking of EVs, I'm fighting the city right now. Who wants to pull out the EV charger? If you know anybody in Syracuse City, we have BTS footage of Paul? BTS footage? Pitch 40 Public Works, DPW, if you know any of these people in Syracuse, they literally are about to remove the only public charger in this entire neighborhood. Oh no. And yeah, we're working on, I don't know if you so if you see me on the news laying down in front of a charger in a pair of you know, you know Jimmy Douglas, Lady chicatelli, John Foley, Alex Lawrence, doing it for you guys. I'll bail you out.

Unknown Speaker  9:26  
All right, listen to Nathan.

Paul J Daly  9:28  
I'll bail you out. I bet we could raise quite the bailout fund for that amongst, amongst the dealers in the area.

Kyle Mountsier  9:35  
There you go. Speaking of bailing out, oh,

Speaker 1  9:38  
should we just start with Sebastian Maniscalco on this just hit it. Do you have it? Nathan, did you pull it a little

Speaker 2  9:44  
weeks ago? Love Chipotle. They make a really nice burrito over there. It's so terrific that the employees can't stop eating it. The employees are never working. They're always in the dining room. They. Eat. The only guy behind there is the guy cutting chicken, just looking at you.

Unknown Speaker  10:10  
Perfect place to stop for video, perfect place

Kyle Mountsier  10:13  
just looking at you actually. Just try this other try to change that. A new con customer study revealed Chipotle lack friendliness and cleanliness, especially during peak hours. So CEO Scott Boatwright has announced a new get this hospitality push, including smiling staff novel novel theory, cleaner dining areas and better on site. Issue, recovery, every employee is now getting coached to greet customers with a smile. It's so simple at the tortilla station, and end transactions with a heartfelt thank you, reinforcing the culture of warmth without slowing operations. I love that. His quote, he says, the fact is, smiles down the line. Don't slow us down. 3800 restaurants now have been trained, so we'll see. You know, visit, visit Chipotle this weekend, see, see if they get that access exceptional hospitality. I think they probably need a little will get there in their lives. Maybe despite a dip in overall transactions, q1 sales were still up 6.4% to 2.9 billion, driven by a bunch of new locations. Nathan said he still loves Mo's because they yell Welcome to Moe's when Starbucks

Paul J Daly  11:21  
is taking a little cue out of their playbook, we walk in the Starbucks people are yelling at me, welcome, welcome. Welcome to Star like, literally, it feels like you're in MOS at my Starbucks right

Kyle Mountsier  11:29  
now. Wow. Okay, that's that feels a little aggressive for quite,

Paul J Daly  11:33  
not quite welcome. Well, I mean, like you would, you would argue whether or not Starbucks is a coffee shop Kyle. I mean, what are you really doing over there? But this whole thing with Chipotle, I love the perspective that the smiles don't slow us down, right? I've heard, I mean, you can't underestimate what a smile does for a customer, a genuine smile, and also what it does for the culture. When you start to build it in, I expect they're going to face some resistance over this, I expect there's going to be some adoption issues that they're going to have to lead through, but I do believe if they can lead properly, eventually it would just become the norm, and like any cultural excellence, it started having to be enforced. It took Chick fil A seven years to make my pleasure the standard. Did you know that it takes a long time, seven years, but now everyone's like, no, they always don't like. They magically flip the switch. Oh, by the way, guys, we're gonna say not my pleasure instead of Thank you. Everyone's like, Okay, let's go.

Kyle Mountsier  12:30  
This is a cultural shift that will have to happen in an org like that that big. We'll

Paul J Daly  12:34  
see if they have the fortitude to execute it or not. But I think there was a lot we can take away from this in our dealers, along the front lines, in the service lanes every single day by just the simple thing as a greeting and a smile, changing the whole dynamic of the experience. Look. Thank you so much for being here with us today, always. Thanks for listening to the show. Thanks for reading the email. We hope you can join us at ASOTU CON this year, where we can talk about this stuff. Make changes, move forward together. You.

Transcribed by https://otter.ai

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