Yahoo Finance

Tina Miller

Thank you, Bryan. The momentum across our operations is creating a strong foundation to accelerate our value particularly through our SG&A execution, increasingly profitable financing operations, disciplined capital allocation and continued focus on balance sheet strength. We're encouraged by our SG&A performance to start the year, building on the improvements we promised and delivered as part of the 60-day plan in the second half of 2024.
Our adjusted SG&A as a percentage of gross profit was 68.2% during the quarter, a 120 basis point decline from the prior year and 67% on a same-store basis, a 150 point basis decline. While we are pleased to see continued progress, we remain focused on disciplined cost management every day. We continue to see opportunities to enhance efficiencies across the business with targeted efforts underway in both North America and the UK.
As we move through the year, we believe we're on track to achieve same-store SG&A in the range of 65.5% to 67.5%, as we take continued steps to ignite the full potential of our operating model. Our team's relentless focus on delivering exceptional customer experiences and driving performance through people was on full display this quarter.
We are proud of the progress we've made to start 2025 with strong execution across operations and clear momentum in key areas of the business. As we look ahead, we remain focused on deepening customer loyalty, unlocking store and departmental potential and scaling growth across our ecosystem.
Starting with our financing Ops segment, led by DFC, we delivered another quarter of profitability with income of $12.5 million compared to a loss of $1.7 million in the same period last year. This performance reflects the continued maturity of our portfolio, improved capital efficiency and continued maturing in our securitization performance. Following a full year of profitability in 2024. We expect a consistent earnings trajectory in 2025 as we balance yields, growth and risk.
DFC originated $623 million in loans during the quarter, a 24% sequential increase, bringing the total portfolio balance to over $4 billion. Portfolio quality remained strong, supported by disciplined underwriting and a focus on higher credit tier originations with new FICO scores expected to average [730] in 2025.
The net interest margin continued to be expanded, increasing 117 basis points year over year and 7 basis points sequentially. NIM expansion increases profitability and add flexibility to continue scaling the platform as we move toward our goal of 20% penetration. These results demonstrate the strength of our financing platform and its growing contribution to our long-term earnings potential.
Overall, our financing operations adjacency has delivered high performance growth and is a key element of our $2 of EPS for every $1 billion of revenue target as each loan originated by DFC contributes up to 3 times more profitability than traditional indirect lending. We remain confident in this segment's long-term earnings growth and expect increasing profitability as we increase penetration and strengthen our track record.
Now moving on to our cash flow performance and balance sheet. We reported adjusted EBITDA of $402.1 million in the first quarter, a 17.1% increase year over year, driven by increased earnings and decreasing floor plan expense.
During the quarter, we generated free cash flows of $276 million. Our capital deployment strategy focuses on the efficient allocation of our business regenerative cash flows preserving the quality of our balance sheet while supporting our growth initiatives and allowing us to respond opportunistically to a complex environment. This quarter, we completed a couple of acquisitions, deploying $75 million for those transactions, but we're more heavily weighted to share buybacks to be opportunistic with the fluctuating market.
In the first quarter, we repurchased 1.7% of our outstanding shares at a weighted average price of $329, $687 million remains available under our share repurchase authorization. Looking ahead, we will continue to remain agile in reallocating capital where it generates the highest returns. We expect to allocate 30% to 40% of free cash flow for share repurchases while continuing a disciplined approach to M&A opportunities.
Additionally, capital expenditures have moderated and are now primarily directed toward network optimization and meeting OEM facility requirements. We ended the quarter with a net leverage of 2.5 times, in line with our long-term target of 2 times to 3 times and well below our bank covenant requirement of 5.75 times. These metrics adjusted for the impact of floor plan debt collateralized by vehicle inventory, which is unique to our industry and integral to our operations.
The industry treats the associated interest as an operating expense and EBITDA and excludes this debt from balance sheet leverage calculations. Similarly, we exclude ABS warehouse lines and issuances to capitalize DFC from our leverage calculation. While we opportunistically allocated capital during the quarter, we maintain our long-term focused financial discipline to support our planned growth.
Our strategy remains focused on delivering strong, consistent growth and top-tier shareholder returns through the continued expansion of our omnichannel platform. With the right team, robust tools and a solid financial foundation, we are positioned to scale profitably across both our core operations and adjacencies.
As we look ahead, our diverse and capable teams are united by a commitment to exceptional customer experiences and are well equipped to unlock the next phase of growth in 2025 and beyond. This concludes our prepared remarks.
With that, I'll turn the call over to the operator for questions. Operator?

Question and Answer Session

Operator

(Operator Instructions)
Ryan Sigdahl, Craig-Hallum Group.

Ryan Sigdahl

Hey, good morning guys. Want to start just at a higher level, kind of what you're seeing from a current tariff environment. If you want to talk monthly trends throughout the quarter and then into April, that might be helpful, both from a demand and GPU. And then kind of second part to that, how you view your higher inventory levels relative to some of your peers, how that's positioned you in this environment again kind of more into April from that question standpoint.

Bryan DeBoer

Sure, Ryan. Good morning. This is Bryan. I think we're very fortunate that with tariffs, we sit quite nicely. We have over 45% of our inventory that's going to be where the current tariffs are sitting. Obviously, we know that there is still a little bit in limbo.
But where the current tariffs are sitting, we have about 45% of our inventory that's not impacted, okay, which is I believe in most of the major retailers, that's probably the most diversified and the least impacted, which we're pretty excited about that.
I think more recently, as we think about moving forward, our inventories have come down a lot. I mean, we dropped our inventory in both new and used almost 10-day supply quarter over quarter, which is a good step forward. And I think when we think about go forward, it's more about store leadership, staying dynamic and specifically focusing on their brand and their market. And we've been pretty successful that way.
You also had asked a question about what happened sequentially in the quarter. We were actually motivated by a strong January, a strong February and then early March is when the tariff discussions start and it came out strong as well.
So it was consistent throughout the quarter, and we're pretty confident that looking into Q2, we've got good foresight into what our inventories and our costs are and most manufacturers have stabilized pricing for some level, at least through the 2025 model year, and we'll see what happens beyond and hopefully, there's some relief to the current situation given.

Ryan Sigdahl

Helpful. Staying on the tariff topic. Any way to put kind of guardrails and you did this several years ago kind of with the SAAR just the levers you can pull in kind of the earnings power and up down from a leverage standpoint.
But if ultimately kind of in the back half of this year and next year, we go to a [14 million or 15 million SAAR] prices stay higher affordability, et cetera. I guess any way to help us kind of from an earnings power standpoint and what that might mean for you guys?

Bryan DeBoer

Ryan, I think it's important to remember where our product mix is and that we've designed our entire ecosystem around affordability. So having 20-year-old cars, and you saw that we had a 39% increase in our value auto sales year over year . That's a big increase, and it shows the strength of the model that we're a little less concerned about what the specific tariffs is so long as they stay within the ecosystem.
So create affordable products to and from top to bottom, whether it's in after sales, new cars or used cars and stay focused on what we can control because ultimately, we do have a fairly adaptable model, because of that affordability range.
And remember this, I mean, Driveway.com, GreenCars and DFC help massively in terms of how we think about diversification. And now that DSC is turning some pretty good profits, that takes out some of the volatility as we look at things. I would note one other thing for everyone. It's important to note that the Pinewood market valuation change was $0.27. So we were at $7.93, which was considerably ahead of consensus. And that's something that, to some extent is outside of our control.

Ryan Sigdahl

Helpful. Thanks, Bryan. Estimates also walk right over the last week or two. You would be stale ones. So thanks. Good luck guys.

Bryan DeBoer

Oka,, thanks.

Operator

John Murphy, Bank of America.

John Murphy

Good morning, everybody. [He did] Bryan, just to stay on tariffs for a second from two different prongs. First, what kind of communication have you received from your factory partners? And have you seen any impact to the M&A environment as a result of the uncertainty around tariffs?

Bryan DeBoer

Maybe I'll start with the latter. We haven't seen a big impact in the M&A environment. However, it does -- it has appeared to be softening over the last, I would say, three to four months. But specific to the start of March, we haven't seen any major changes. In terms of communications from our manufacturers, I might let Adam jump in on that real quickly.

Adam Chamberlain

Hey John, good morning. I think we've seen great -- as far as the manufacturers know exactly what they're dealing with because obviously, it's an extremely volatile situation, John. I think we've seen clear communication. We had some early communications around guaranteeing holding prices through certainly for most OEMs, it's through end of May. So that takes care of the 2025 model years.
And obviously, in that context, we're also kind of bottom of the funnel, right? So the OEMs have got to deal with, with that support and help if we can. But ultimately, they're going to deal with the administration and thinking about how they allocate their resources and the investments to manage tariff situation.
So we sit kind of a ways below that, but we've had really good clarity and leadership from the majority of our OEM partners as it relates to that. I think the other point is our job, as Bryan said, it's just to be disciplined moving forward. So our stores have been disciplined in terms of the way they manage their operations. And I think we demonstrated last year, we can adapt and flex pretty good when we need to. So that's how I think about it, John. Thank you.

John Murphy

Good. That's helpful. And Bryan, just a second question. When we think about sort of the adjacencies, particularly and then the benefits you get on SG&A over time. Is there kind of a notion that you might lower your expectation for front-end gross to take more market share over time? And kind of how do you balance that out.
I mean getting UIOs is mission-critical for parts and service. So just curious how you think about that full surgical equation. Does this allow you to take more market share and then feed the beast at the back end and grow earnings even stronger. I'm just kind of how do you balance that all out.

Bryan DeBoer

Great question, John. And I think that our original thesis on the design was that if we're able to create transparent simple experiences for our consumers, then there's actually a price inflection upward, not downward, okay.
We already buy cars and our cost of vehicles are at a cost advantage of about $500 to $700 over the used only retailers. Important to note, but we also give away that $500 to $700 in terms of price to market of what we sell cars for because we negotiate a way that gross profit in lieu of getting more customers financed, okay? So I would say, if anything, and today, we're looking at a $4,100 to $4,300 total vehicle gross profit, okay? That's down a couple of hundred bucks primarily because of the mix change in Pendragon that rolled in this quarter.
If you remember, it was $4,300 to $4,500 prior, okay? We also did elevate our new vehicle gross profit because our mix is so much better and has so much more luxury as well as Southeast exposure, which is higher gross profits. So we raised our expectations internally to $2,600 to $2,800 on new vehicle gross profit.
So I would say if we're looking out four to five years, I believe that there's opportunity to grow our used vehicle gross profit which is the biggest impact of the Driveway ecosystem or GreenCars sales, and it's primarily because you're getting more eyeballs on each and every car in that price inflection point that today, we don't have all those eyeballs.

John Murphy

Okay. If I can sneak in one last one. That's helpful. Tina, on the ABS, your deals you're doing with DFC, I'm just curious what kind of receptivity you're seeing in the market, what market conditions are currently like -- and over time, is there opportunity to do larger and larger deals as you get more seasoned in the market?

Chuck Lietz

Hey John, this is Chuck. Right now, we had a very successful ABS issuance in the first quarter. And that went really well with a number of our tranches that were subscribed. Right now, though, the ABS term market is rather frothy and choppy, and that's just a reflection of where the overall capital markets are going.
We do expect that to stabilize, though going forward, and we'll be very diligent on making sure that when we do launch our next issues, it will be at a point in time that is optimal for our business. So we don't see any long-term impact on our capital structure for DFC.

John Murphy

But fair to say there's plenty of room in the warehouse facility.

Chuck Lietz

Oh absolutely. Plenty of room on the warehouse facility to absorb that if there is choppiness in the term market.

John Murphy

Thanks so much guys. Congrats Adam. Thank you guys.

Bryan DeBoer

Thanks, John.

Adam Chamberlain

Thanks, John.

Operator

Rajat Gupta, J.P. Morgan.

Rajat Gupta

Great. Thanks for taking the question and I just wanted to convey my congrats to Adam as well. I had a first question just on SG&A. The sequential pickup on net growth was a little higher than seasonality if we exclude the UK.
Curious if you could unpack that for us a little bit because it looks like the SG&A dollars went up more than the gross profit dollars relative to the fourth quarter. If you could just elaborate on that a little bit would be helpful.
And also just a clarification, the pine would $0.27 charge, that all of that was flowing to other income, am I right? If not, if you could clarify that as well would be helpful. And I have a quick follow-up.

Tina Miller

Hi Rajat, this is Tina. Just on your Pinewood question, yes, the impact of the fair market value adjustment on Pinewood does flow through others, so you can capture that and see that in that line. It was a pretty decent impact when you adjust for that, our overall EPS performance is really strong.
From an SG&A perspective, I think most of it is really driven by seasonality. When you look at the year over year performance on SG&A, I think we're really happy with it. Same-store improved by 150 basis points on a consolidated 120 basis points.
One of the first quarters where we're seeing that decline in SG&A as a percentage of gross profit. So really, the continued discipline from our 60-day execution last year and continued flow-through of that discipline by our stores. it will be something that we continue to watch, obviously, and performing throughout 2025.

Rajat Gupta

Got it. And you think about the path from that 68% within your guidance range, like, say, the midpoint -- is there like more cost reduction to come? Or is this just more about just leveraging the gross profit? Any areas within the gross profit bucket, like mark and services or other areas that there's some opportunity that we should be making.
And obviously, we have the full year guidance ranges out there, but it just seems like a pretty decent size improvement baked in for the remainder of the year to get to your SG&A guidance, especially with the new car GPUs are expected to come down through the course of the year. Thanks.

Bryan DeBoer

Rajat, this is Bryan. Maybe I could elaborate a little bit as well. I think when we think about the original 60-day plan that's now part of the everyday plan, our field and our operational leaders they understand that our goal is to drop about 7 basis points out of the model each and every month starting in the second half of this year. So now that's on our pathway to the 50 -- the mid-50 SG&A range. So it's important to remember about how we think about things.
But again, this isn't going to happen overnight. I mean, we get benefits all over the ecosystem, including the eventual transition into the Pinewood software system, which is a $30 million to $40 million savings. We took out another $30 million to $40 million out of our current tech stack with what George did and what the stores did with vendor pricing. And now we're starting to really impact our interest costs, which obviously is it part of SG&A, but it's a big part of our cost structure and it's the third largest cost in our vehicle department.
So I think that where we ended up with the quarter, we're comfortable with. Our Q1 and Q4 typically is at the higher end of the range our Q2 and Q3 are typically in the lower end of the range. It's primarily based on the fact that we have a fair amount of our businesses in the snowbelt, okay? So hopefully, that helps you, Rajat.

Rajat Gupta

Got it. No, thank you. I appreciate it. I'll get back in queue.

Operator

Kate McShane, Goldman Sachs.

Mark Jordan

Good morning. This is Mark Jordan on for Kate McShane. Just thinking about the tariff on imported parts, how do you see that impacting your aftersales business, I guess, with respect to margins? And then would you expect to see some level of deferred maintenance as customers avoid some noncritical repairs?

Bryan DeBoer

Mark, thanks for your questions. I think we're really -- we've thought through the aftersales repercussions of higher tariffs. We're fortunate that most customers do need to repair their cars. And whether it's maintenance or whether it's hardline repair, that's a positive thing for us.
So I think when you think about the parts versus labor equation, we did have a pretty good lift this quarter in terms of labor, and we're up over 57% margin, which was quite nice and a little higher than what we typically expected in our forecast running at 55% to 56% over the last few quarters.
But I really believe there is no big option to defer okay, especially when we, in our aftersales businesses deal with affordability. So we're the same price as the Jiffy Lubes of the world and the AutoZones of the world.
And we sell aftermarket parts and we sell OEM parts and as such, we want to keep those customers in the ecosystem. So I think the impact in the after sales business from tariffs, whatever they may end up being is pretty minimal.

Mark Jordan

Great. And then one last follow-up. Just on capital allocation. share repurchase is obviously a bigger part of the mix in the quarter. It looks like it might be in the near term. But as we think about your acquired revenue targets, is the $2 billion to $4 billion still in the cars for the year?

Bryan DeBoer

Mark, this is Bryan again. I think that we've specifically said that it's probably going to be closer to $2 billion this year. And you can see it in our share buybacks at [$150 million, $160 million] about 2% of our float just in the quarter. That's a big amount of buybacks and obviously, that brings it down.
In the prepared remarks, I did mention that it's $2 billion to $4 billion going forward. And then again, we're still looking for that more major meaningful acquisition at some point in our lives and believe that the industry can be consolidated and one plus one can truly equal three.

Mark Jordan

Great. Thank you very much.

Bryan DeBoer

Thanks, Mark.

Operator

Jeff Lick, Stevens.

Jeff Lick

Good morning guys. Congrats on a nice Q1. I was wondering if you could -- we could drill down a little bit on used specifically the value use. Just starting off with the GPU at $1,769, which is below your guidance, whether there's some bit of just purging inventory? I know there's a lot of things you wanted to get right -- if you could just talk about any of that, especially as we get into the tariff world. My perception is that your heritage of doing the value auto will actually maybe benefit a little bit. So any color there?

Bryan DeBoer

Yeah. I don't think there's any sub story to the $1,769. I will say this, it takes us typically about six months to gain initial traction on teaching our new partners or new stores to sell and keep off brand cars as well as keep the older cars or these value auto cars. So Adam and the teams and our Presidential teams and Vice President teams and field teams have done a darn nice job, understanding that we don't wholesale cars, okay?
We keep everything to bring consumers into the ecosystem into lower price point or possibly as a cash buyer because as we know, value auto cars don't have a lot of financing, it's about 50% cash buyers and about 50% financed which has a certified car is about 90% finance and about 10% cash, okay? So it's not that you're looking for buyers that aren't able to get financed or has poor credit.
These are cash buyers that are very thrifty with very high demand cars that move quite quickly through the system. And our stores are getting it, okay? And I'd send the challenge out to everyone that if you're not at 40%, okay, or better in terms of value auto sales, it's the one bucket that does not have an impact from lower SAARs.
Okay, lower SAAR from previous years. Okay, in core is now just starting to trickle in the '21 and '20 model years, which is having a little bit of inventory impacts on our three to nine year-old vehicles. So important to remember, that is important of who Lithia is, all affordability levels and most importantly, these value and core products are where we really shine, okay?
And Jeff, I think you know this, the GPUs are somewhat similar, okay? Important to remember, but the really important thing to remember is our average ASP on a value auto car is about [$14,500, okay, versus a certified that's pushing 30]. So you've got that.
And on top of this, the value auto car turns at 2 times to 4 times faster than a certified car. So when you're looking at utilization of capital, you're talking about 8 times better return in an annual basis. So a really important part of the model.
And I think most people are starting to figure that out. And it's -- we're fortunate that we're so far up funnel that we're able to continue to get those great cars and deciding now not to wholesale them.

Jeff Lick

And just a quick follow-up on your comment about taking six months to get initial traction. I'm just curious, is that the stores you've acquired, say, over the last four or five years that really haven't just gotten up to speed on the Lithia heritage? Or were there some of your position some of the line --

Bryan DeBoer

Great clarification. So if you recall in our previous calls, we bought so much bulk and the lift of GPUs made everyone think that we were doing wonderful. So it's really hard to convince people that they should do more.
So I really believe that it was about three to five quarters ago where people started to listen and go, wow, there's opportunities here. And it is mostly new cars and new businesses that are finally gaining the traction that we're really excited that we move from a, what a minus 5% used car same-store sales last quarter to basically flat, okay?
And those days of mid to high single digits are in our future. And I mean we're really looking at a 5% more longer-term number or better in terms of used car sales, especially when you've got GreenCars and Driveways that are bringing in 97% new customers and is truly limitless and who we can touch and find.

Jeff Lick

Awesome. Congrats again and look forward to talk to you in the next quarters.

Bryan DeBoer

Thanks, Jeff.

Operator

Doug Dutton, Evercore.

Doug Dutton

Good morning, everyone. Maybe just going down the value chain here. With USR at nearly 18 million units on an annualized basis, over March and now into April, how are your dealers and your general managers dealing with the prebuying from consumers as they're going to need to prepare for a potential hangover if the tariff situation extends into June or July or August, what's the guidance there on some of the lumpiness that we might see after the sugar rush share?

Bryan DeBoer

Yeah. To be fair, I mean, remember, we had a [17 million SAAR four months ago, too. So a little extra lift is not a massive amount. I believe that we will have 18 million SAARs consistently. And if I believe I believe I said that last quarter on this call that we could see a year where we have an 18 million SAAR].
Now, I do agree that if the tariffs stick at where they're sticking, we could see some lumpiness, okay? But I think it's more of lumpiness in fall, not really lumpiness as we go through the summer season. I would also remind you of this, okay?
We have 50% of our cars that aren't affected by tariffs. Now if you're a European heavy, you may have a bigger problem, okay? Because Europeans don't have the same competitive pressures across their product line. Most of their specific products pretty high demand, whether it's an M class or an AMG or GTS and Porsche, they're high demand. Are you following me?
So I think that they've got price flexibility -- but their main product lines are what's going to be impacted the most. The import manufacturers from Asia, I believe, are hypercompetitive. And they're talking about how to freeze pricing or how to decontent cars. But I believe affordability will be there. So I believe whatever pull forward there may have been in the second half of March, it's light, okay, and shouldn't impact the future going forward on any relative scale.

Doug Dutton

Awesome. Thank you. And then just a quick follow-up here on your thoughts around incentives and the discipline there. Has there maybe been an opportunity to take some of those dollars off the hood on your sales to move where you were previously had them in there to move the metal just given the fact that there was this sort of sudden surge of demand. Can you speak to that a little bit?

Bryan DeBoer

Sure, Doug. We did see a little bit of a profit increase in March in terms of GPU but that is also pretty typical because we have quarter end money. So it was a couple of hundred bucks higher than what we would have expected. In terms of incentives, as a dealer, we just sell for net price and sell for payment. So it's not big impact to us.
I would say this that incentives are still quite low. So the manufacturers have a lot of ability to absorb some of those cost increases if they choose to. And we are seeing strengthening of that, especially when it comes to leasing.
I think we're pushing almost 20% leasing again, which on a pre-covid number, we were we were in the low 20 percentile. So nice gains. I think it was 17.5% or something, but it was up a couple of percentage points from last year, which is a good indication of strength of incentives which come in the form of lease in values or lease multiple factors, which is the equivalent interest rate on leases.

Doug Dutton

Thanks team.

Bryan DeBoer

Thanks, Doug.

Operator

Ron Jewsikow, Guggenheim.

Ron Jewsikow

Yeah. Good morning and thanks for taking my questions.

Bryan DeBoer

Hi Ron.

Ron Jewsikow

Hi Bryan. Maybe following up on Rajat's SG&A question. You mentioned in the back half, you expect to drive 7 basis points of monthly savings. I guess, first, is that all in SG&A and interest? And then what is like some of the low-hanging fruit or maybe it's not that low hanging, but what are you pushing your managers on really to drive those improvements?

Bryan DeBoer

So yes, it includes the interest. And the primary areas that we're pushing are operational leaders is on personnel costs, okay? In our model, when we look out five years, we're basically asking for a 10% to 15% total percentage reduction in terms of personnel costs. Today, it sits at about just under 40%. So we're looking at somewhere around a 4% to 6% reduction over the next five years, okay.
We don't want to make it a heart attack. We don't believe that we could do it today because there's technology, productivity increases, customer self-service and many other things that need to come into play to be able to activate that amount of change, okay.
But we do know that they believe it's in bite-size amounts that they're not fearful of it. And as such, we believe in the second half of the year, we can drive that begin to drive that down, okay. That makes up about 50% of the improvement. The other 50% is truly leveraging our corporate costs as we don't need another tenant, we don't need another me at this stage, right, okay? But that's -- you gain some scale on those type of things.
Obviously, there are some vendor contracts that we believe are beneficial. I mentioned the Pinewood thing in the future. And then ultimately, as we bring vendors together as more preferred vendors where we have two or three vendors of each product rather than 20 or 30, we're able to negotiate volume discounts and other benefits as well. But that's where it comes from. We've got it all lined out to achieve the $2.
We're pretty excited about that operational part, which makes up 50% of the $1-plus lift that needs to occur. Remember, the other 50% lift is coming from the ecosystem, good capital allocation that Tina spoke to, a little bit of M&A and some great adjacencies that are really starting to shine.

Ron Jewsikow

Yeah. No, that's super helpful color. And maybe just following up on one of those kind of ecosystem items. Pretty big step-up in DFC originations this quarter. anything that specifically changed? Because obviously, your sales volumes weren't sequentially stronger than the fourth quarter, which was always seasonally strong. So just trying to get a sense of what drove the pretty material step-up in originations.

Bryan DeBoer

Now Ron, this is Bryan again, and I probably should just let Chuck handle this, but I listened really good to Chuck and Tina, okay, and they've taught me well enough to know this. Our NIMs are increasing so nicely that it allows us the flexibility to scale our penetration rates without sacrificing credit quality, okay? In simple terms, we were at 13.7% for the quarter. We even had a [14%-plus] in there, which was great to see.
April is looking pretty good as well. So it's really having that middle of the 400 basis points to 600 basis points of NIM to have the flexibility to scale when the credit opportunities are there with an ultimate end of year target exit rate of around 15% and an ultimate target of 20%.

Ron Jewsikow

Okay. No, that's super helpful. Thanks for taking my questions.

Operator

Daniela Haigian, Morgan Stanley.

Daniela Haigian

Thanks, Bryan. Just to squeeze one in on parts and service. You -- and aftersales, you spoke to room for uplift with relatively inelastic demand what does capacity and tech availability there look like? And how does that continue to grow in the segment? Thanks.

Bryan DeBoer

Daniela, thanks for the question, and congratulations on taking us over now, which is great. We look forward to talking a little more deeply. In terms of after sales demand, we're quite fortunate that even though there's not a lot of units in operation out there, we do price our products within all ranges of the marketplace. So our affordability is quite cheap. So when we think about our aftersales business, it's truly about providing individual experiences that create optionality for each and every customer.
And I think as an organization that has been able to do things the same way, okay, we are now starting to think about individuality. Why I'm talking about that is because when you think about what's coming into our shop, we can have a lot more consumers coming in.
Today, our [SAAR] utilization is somewhere south of about 50%. And meaning in theory, we could double our capacity by opening extended hours or moving to double shifts or triple shifts, which many of our stores have moved to, okay? If we think about our staffing levels of our technicians, we're sitting really nicely in terms of that as well. We grow our own technicians most of the time, okay?
And today, I think the biggest mindset is we're filling our shops with warranty work, and we should be filling it with warranty and customer pay work, okay? So there is a mindset in our shops that build their production plans and their production plan calls for 1,200 hours and they got an extra 100 hours that's coming from warranty and they take it out of customer pay. We can't do that, okay?
We need our after sales leaders, motivated to take the work and improve the productivity of their technicians. It's there today. That productivity level is there today with people ready to turn wrenches. We just got to open up the funnel, okay? And it's starting to matriculate through and Adam and our teams have been working on that, and I'll continue on that pathway over the coming quarters.

Daniela Haigian

Thanks, Bryan.

Bryan DeBoer

Thanks, Daniela.

Operator

Bret Jordan, Jefferies.

Bret Jordan

Hey, good morning. I have a question on the tariffs. When you think about customer pay, obviously, and you've got the 25% auto bucket, but then you've got the metals and the reciprocals, could you help us with the expected growth rate in the customer pay business just tied to inflation in parts pricing?

Bryan DeBoer

I think -- this is Bryan. I would indicate that we believe that customer pay should be able to grow at low to mid-single digits in the short and midterm. And long term, it should be able to grow mid to high-single digits. That's where we were pre-COVID. And it's really just a matter of inspiring our after sales leaders to be able to do that.
I don't know if you recall, but we haven't the LPG that was expanded into the departmental leaders, and they're fighting hard to be able to grow their RO count as well as their our count to be able to win the LPG award, which is our Lithia Partners Group, which instills loyalty potential and growth.
So with that, outside that, we've got to be more competitive than what our peers are. And ultimately providing that optionality and that individualistic experience to our consumers will get us there.

Bret Jordan

Right. Wouldn't just the price of the part gets you to a low to mid-single-digit growth if they say, chassis parts are in the auto part bucket. So that's 25 points of tariff just the price of the tariff alone gets your growth is, I guess, is the question, what excess growth we get on --

Bryan DeBoer

Possibly. But again, I mean, we're assuming that the content of the car that 50% of it is domestic we made. So that's not going to be impacted by tariffs. But yeah, there could be 2% or 3%. Maybe we'll look a little deeper into that. I think being downstream, we just try to respond to the environment and be proactive with our specific manufacturers or region.

Bret Jordan

Okay. And then I guess on regions, you called out the South Central and Southeastern region as being more profitable for a while now. Could you give us a feeling sort of what's a regional EBIT of the high-profit region versus maybe a low profit region was the spread?

Bryan DeBoer

Sure. And I think -- it's interesting that when we look at the regional performance today, we're encouraged that the gross profit in the Northwest and Southwest which were the two weakest regions over the last two years are now the two strongest regions. So we're quite fortunate when we look at that.
On a same-store basis, though, despite that, the Southeast and the cell center are both quite strong. but it's not showing through in gross profit. So I don't know if that reads through to the marketplace. When we think about profitability through net profitability, again, the Southeast and South Central are running at approximately double the net profit to revenue of what our Southwest and South and Northwest regions are, okay? And that is not a Lithia anomaly that is a fact of life.
And it's primarily because of the regulatory environment and the fact that in the red states, you're able to have dock fees that are excessive that have no costs really attached to them other than the general manager, okay, which is an automatic $500 to $1,000 additional profit that drops to the bottom line creating that delta.

Bret Jordan

Okay. Great. Thank you.

Bryan DeBoer

Thanks, Bret. Appreciate it.

Operator

Colin Langan, Wells Fargo.

Colin Langan

No, let's check my question. Just to clarify, I mean the guidance still is for mid-single growth in new vehicles. Is that incorporating any tax? It doesn't sound like it. I mean, is that assuming that -- sorry, the tariffs -- and does that assume tariffs sort of moderate as we get into the second half of the year? And if they don't, kind of downside risk should we be thinking about?

Bryan DeBoer

We're pretty comfortable with the low to mid-single digits as our target throughout the year. And we believe that because of our exposure, we should sit pretty nicely in terms of what happens with tariffs. I mean no matter what happens, you still have a competitive market that has to deal with affordability and has to deal with their production schedule. So with that, we believe that we're sitting quite nicely in terms of being able to respond to the market and continue to grow our new car business.

Colin Langan

And that would be based on like the SAAR for the market would be in the [14 million, 15 million] range if tariffs stay all year and you would just do significantly outperform that market. Is that what you're getting at?

Bryan DeBoer

I don't believe it will be in the [14 million to 15 million range. I believe it will be in the 16 million to 17 million range, somewhere in that range or high 15s. That's probably the low end of the marketplace. We just saw in 18 million. So you're going to end up with a year, if you get a couple of months of 17 million, 18 million SAAR even if you had a 14 million or 15 million in there, you're going to end up in the 16 million to 16.5 million range].

Colin Langan

And then if I look in the sales performance in the quarter, I think same-store was [3.6% on new. I believe US sales are around 5%], and I think retail was even a little better than that. Is that geographic mix that's driving the slight underperformance versus the market?

Bryan DeBoer

It is. As I mentioned, the Southwest and Northwest were on the lower end of the revenue same-store sales growth, but it was also the strongest gross profit area. So -- and that's being affected by the fact that it's lower same-store revenue, okay?
I mean we were up, let's see here, I'll give you some color. I'll blend these. Northwest, Southwest was around 8% in revenue growth, okay? It was on a same-store basis, it was at 3% gross profit growth, okay?
In comparison and contrast, the Southeast South Central was about a 14% to 15% revenue top line growth, whereas, let me get this, Southeast, on a gross profit, it was down 10% in same-store gross profit in the Southeast, South Central, okay?
So some different dynamics happening. I don't know if it's because we have a higher propensity of one brand, but it's a good sign that things are starting to balance out in the country and that our Western exposure that was a little weaker is now starting to strengthen.

Colin Langan

Got it. All right. Thanks for taking my question.

Bryan DeBoer

You bet. Thanks, Colin.

Operator

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Bryan DeBoer for closing comments.

Bryan DeBoer

Thanks, Rob, and thank you, everyone, for joining us today. Hey, we look forward to seeing you all on the Lithia & Driveway second quarter call in July. Have a great spring. Bye-bye all.

Operator

This includes today's conference. You may disconnect your lines at this time, and we thank you for your participation.