Preference for personal vehicles and low interest rates during the pandemic increased the demand for new and used cars, dwindling supplies at auto retailers and pushing up prices.
"We are not assuming that the current margin levels will continue," Chief Executive Officer Bryan DeBoer said on a post-earnings call.
The Medford, Oregon-based company said it expects automobile inventory, crippled by the global semiconductor shortage, to start normalizing in the second half of 2021.
Guggenheim Securities analyst Ali Faghri said he doesn't expect dealer inventory to normalize until late 2022 or 2023.
"Pricing (and dealer margins) have likely peaked, but will likely remain at elevated levels through next year as vehicle supply remains constrained," Faghri added.
Lithia's average gross profit for new vehicles and used vehicles surged 58% and 47%, respectively, during the second quarter ended June 30.
Earlier this week, top U.S. auto retailer AutoNation Inc also posted record earnings and forecast strong demand for new vehicles to continue into 2022.
Lithia said there were 23 days of supply for new vehicles during the quarter, compared with 61 days a year earlier.
The company's quarterly profit jumped to $304.9 million. On an adjusted basis, Lithia earned $11.12 per share, beating estimates of $6.17, according to Refinitiv IBES data.
Revenue more than doubled to $6.01 billion.
The company's shares were up 5.6% at $375.40.
(Reporting by Shreyasee Raj in Bengaluru; Editing by Uttaresh.V and Shounak Dasgupta)
By Shreyasee Raj
