Edmonton-based dealership group AutoCanada Inc. is undertaking a management overhaul in the middle of a major sales slump, using the company predicting conditions can get worse prior to them getting better.
The company announced that Steven Landry – who previously spent 27 years at Chrysler Group, including a stint as president of Chrysler Canada – will require over as CEO on April 1. He’ll replace Tom Orysiuk, who will stay on as president. Company founder Pat Priestner will leave his executive chairman position being non-executive chairman, one step towards retirement in 2017.
The shuffle comes as the company struggles through probably the most challenging periods in its 20-year history. Nearly half of AutoCanada’s dealerships have been in Alberta, where vehicles sales have gone into a tailspin combined with the price of oil.
In your fourth quarter, the company reported an internet lack 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 per cent.
The company said it expects 2016 to become even “more challenging than this past year.”
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In a recent note, Scotiabank analyst Anthony Zicha said his conversations with dealers suggest sales within the Calgary area fell 10 to 25 per cent within the first couple of months of the year.
“Although we’re not by any measure pleased by these results, trust me, it was not a lack of effort,” Priestner said on the conference call Friday.
“(The drop in oil prices) has led to a significant increase in unemployment, a lessening in consumer confidence and a greater difficulty in consumers obtaining auto loans, particularly in Alberta.”
To cope, AutoCanada is working to cut its annualized operating costs by $15 million.
The company’s shares fell 6 per cent Friday to $18.00.
The only saving grace within the quarter would be a 16.5 percent begin used vehicle sales and a 2.6 per cent increase in parts, service and collision repair revenue as consumers opted to buy used cars or hang 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 in the last 2 yrs.
Priestner declined to state the number of dealerships he expects to get this year, 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 he isn’t seeing a big stop by valuations in Alberta, despite the weak economy.
“The dealers in Alberta know how great the forex market has been for probably 20 or 30 years, and lots of options are just hanging on, saying, ‘Hey, we can afford a lousy year, this is the best place in Canada to possess dealerships,'” Priester said.
“That’s been a little bit surprising to me however in some methods I guess it implies that the dealerships are pretty good, valuable assets because otherwise they’d be trading for less than they are.”
