After a couple of sluggish months, it looks like things might be picking up for Ford (NYSE:F). The Blue Oval said that its U.S. sales were up 3% in March.
That's a modest number, but it came with a bunch of encouraging signs. Among them: The last weekend of March was Ford's best in eight years, executives said, suggesting that sales will continue to grow as the weather improves around the country.
But there were other signs that should make Ford shareholders optimistic about the company's first-quarter profits.
Improving weather leads to improving sales around the U.S.
During a conference call for analysts and reporters on Tuesday, Ford executives repeatedly emphasized that the sales picture started to change dramatically in about the middle of March. Early March looked a lot like January and February, with sales subdued as harsh winter weather kept car buyers away from dealers in many parts of the country. But as spring started to set in, buyers returned -- and sales accelerated.
Ford continued to be well-positioned to take advantage of key trends in the market. Among them: a shift away from small cars and toward small SUVs and crossovers, continued strength in midsize sedans, and continued strength in pickups propelled in part by an ongoing rise in new-home construction.
Ford's midsize Fusion posted its best sales month ever in March, with sales up almost 9% over the year-ago month. The Fusion's gains were especially strong in the western U.S., Ford U.S. sales chief John Felice said, where sales were up 22% -- and up 32% in California. Felice said that the Fusion is doing especially well against Toyota's (NYSE:TM) Camry on the West Coast, where Ford's cars in general have seen significant gains over the last couple of years.
Felice was also pleased with the results posted by the Escape SUV. Total Escape sales were down a bit from a year ago due to a shift in fleet orders, he said, but retail sales were up a solid 9, enough to give the Escape its best retail sales month so far. Meanwhile, Ford's bread-and-butter product continued to do well in March -- a promising sign for Ford's first-quarter profits.
Another good month for Ford's most important product
Ford's F-Series pickups posted a 5% sales gain in March, as total F-Series sales broke the 70,000 mark for just the fourth time in the last seven years.
That may seem like a relatively modest sales gain, especially when compared to the flashy 26% increase posted by Chrysler's Ram pickups. But Chrysler appears to have boosted its incentives in an effort to gain market share, while Ford said that it held its per-truck spending on incentives close to the number we've been seeing for months, about $4,000 per truck.
That's about what Ford was spending at this time last year. But there's good news: Felice said that Ford's average transaction price on the F-Series had risen about $900 versus March of last year. That bodes well for Ford's first-quarter profits.
Another strong sign for profits: the gains posted by the Lincoln luxury brand. Lincoln is very much a work in progress, and that work will take years to bear real fruit. But the gains so far this year are encouraging: Lincoln sales were up 31.4% in March, and are up almost 36% for the year so far, thanks to the ongoing popularity of the MKZ sedan. The MKZ, a mechanical cousin of the Fusion, has proven to be a surprisingly solid contender in the midsize luxury segment. The MKZ Hybrid is a particularly strong offering, and sales appear to have exceeded Ford's expectations.
Lincoln's momentum should continue to build once the all-new MKC, a well-appointed compact luxury SUV, arrives at dealers later in the spring.
Inventories are still high but for a good reason
Ford sales analyst Erich Merkle said on Tuesday that the company had a 72-day supply of inventory as of the end of March. That's a little higher than analysts traditionally like to see -- 60 days is considered healthy -- and it's higher than the 62 days' worth Ford held at this time last year.
But as Merkle and Felice pointed out, Ford's inventories got very thin last summer, as some of its factories seemed unable to keep up with demand. That may have cost Ford some sales, and the executives hinted that Ford is deliberately keeping its inventories a bit high right now in order to ensure that it can fill orders as sales continue to rise.
And it looks like sales will continue to rise. The boom in sales toward the very end of March -- as spring weather started to arrive in earnest around the country -- bodes well for Ford's sales, and U.S. auto sales as a whole, over the next few months.
As Ford continues to invest big to expand or restructure operations elsewhere in the world, it's more reliant than it would like to be on the health of the U.S. new-vehicle market. Signs of that health returning are good news for Ford shareholders.