Dealer Groups

Sonic estimates how much hurricanes could impact Q3 results

CHARLOTTE, N.C. - 

Similar to what Penske Automotive offered, Sonic Automotive recently provided an update on the impact Hurricanes Harvey and Irma likely had on its operations.

The details came as Sonic prepares to release its complete third quarter financial results on Oct. 24.

Sonic reiterated that it has 19 franchise stores and five collision repair centers in the greater Houston market, and the group acknowledged Harvey affected operations at all of Sonic’s Houston market locations during the third quarter. Approximately 20 percent of Sonic’s consolidated revenues for the first six months of fiscal 2017 were attributable to the Houston market locations. 

Company officials explained that Hurricane Irma affected Sonic’s operations in Florida, Alabama and Georgia in “varying degrees.” The group noted 24 stores in these regions were impacted by Irma, with 11 Florida locations being impacted the most. 

As of and since Sept. 15, Sonic insisted all of the locations affected by Hurricanes Harvey and Irma were operating, with some locations' operations being limited due to damaged facilities.

The group then acknowledged the effect of these events has had a negative impact on third quarter fiscal 2017 results. 

As of Oct. 11, Sonic now expects to report GAAP earnings per share from continuing operations for Q4 ranging between $0.44 and $0.46 and adjusted earnings per share from continuing operations for Q3 ranging between $0.39 and $0.41. 

Sonic estimated the negative impact experienced Q3 to be offset by a lift of increased automotive retail sales and service activity in the fourth quarter.  Accordingly, Sonic expects fiscal 2017 GAAP earnings per share from continuing operations to be between $1.55 and $1.65 and expects fiscal 2017 adjusted earnings per share from continuing operations to be between $1.85 and $1.95.  

KeyBanc dealer survey recaps August used slowdown

CLEVELAND - 

Along with projecting how third-quarter results might land for a trio of the large publicly traded dealer groups, KeyBanc Capital Markets recently shared its latest dealer survey that offered more clarity on how much Hurricane Harvey impacted used-vehicle sales in August.

The survey results showed just a third of dealers who participated had used-vehicle sales increases in August. And if they did, it was for 5 percent or less.

Meanwhile, another third posted a used-vehicle sales decrease of 5 percent or less while the remaining third sustained a more significant used-metal slowdown, with sales softening anywhere from 5 percent to 10 percent.

While used vehicles might not have been rolling over the curb at the frequency surveyed dealers likely wanted, KeyBanc’s report indicated 70 percent of stores kept their used-car gross margins either intact or managed an increase below $50.

In the finance office, F&I performance continues to be strong part of dealership activity. KeyBanc highlighted that over the past three months, an average of 72 percent of respondents reported intact or increasing F&I gross profit per unit.

“However, we caution upside appears limited from these record highs, which is also reflected in more mixed responses in latter months,” analysts said.

Over in parts and service, KeyBanc noticed the dealer survey showed the weather impacted sales in that store segment, too. A third of participants said P&S sales dipped by 5 percent or less and another third added that service drive sales activity decreased by 5 percent to 10 percent in August.

But like used-vehicle deliveries, nearly 70 percent of dealers surveyed said that P&S gross per unit remained intact in August.

Moving on to a discussion about some specific dealer groups, KeyBanc’s report touched on estimates for how AutoNation, Sonic Automotive and Group 1 Automotive might fare when they release their third-quarter financial statements.

For AutoNation, KeyBanc pointed out that the company does not adjust earnings for nonrecurring items, and “we believe, in addition to the deleverage effect of temporary store closings, earnings results will likely be impacted by insurance deductibles,” analysts said.

Over at Sonic, KeyBanc mentioned the company will likely adjust for nonrecurring items. “However, the deleverage effect of temporary store closings will likely weigh on adjusted earnings in Q3,” analysts said.

Finally for Group 1 which had the most stores impacted by Harvey, KeyBank recapped what company officials recently shared “immaterial” new- and used-vehicle volume impact on full Q3 results as volumes picked up “substantially in September, and management agrees replacement demand will likely remain a tailwind to volume in the near future.”

Penske’s Puerto Rican businesses still suspended in wake of hurricanes

BLOOMFIELD HILLS, Mich. - 

Penske Automotive Group took a strong hit from the trio of hurricanes that stormed through the Caribbean and the Gulf of Mexico since the end of August.

The dealer group recently provided a preliminary estimate of the impact on its operations in Florida, Georgia, Texas and Puerto Rico from Hurricanes Irma, Harvey and Maria. The company operates 19 dealerships and three collision centers in the affected areas, which represented approximately 9 percent of the company’s consolidated revenue for the six months that ended June 30.

Penske emphasized that Hurricane Maria has significantly impacted the island of Puerto Rico as the power grid and communication systems on the island have been severely damaged. As a result, certain segment of the company’s operations there have been suspended and are expected to remain impacted for the immediate future, according to a news release distributed by Penske.

“Our first priority in Puerto Rico is assisting our employees and their families as recovery efforts continue on the island and we are working directly with our Puerto Rico team towards that end,” the company said.

Penske continued that Hurricanes Irma and Harvey disrupted operations in Florida, Georgia (particularly the Atlanta market) and Texas, especially Houston.  Operations in Florida and Texas were impacted for nearly one week while Georgia experienced a disruption in operations for two days or less.

The company indicated operations in Florida, Texas and Georgia are now operating at full capacity.

“The well-being of our associates and their families, some of which have suffered significant hardship, is our first priority,” chairman Roger Penske reiterated.

“We are directly assisting those employees who suffered storm-related damages and have paid employees who were unable to work because of these hurricanes,” he continued. “The efforts of our employees in preparing our dealerships for the storms in the affected areas prevented significant losses and I thank them for their outstanding efforts.” 

As a result of the hurricanes, the company’s third quarter financial performance is expected to be adversely impacted. 

Executives noted the assessment of losses in Puerto Rico is ongoing and is expected to continue for the immediate future as basic services to the island resume.  The company currently estimates that storm-related losses, expenses, and business interruption, net of expected insurance proceeds, will reduce earnings per share by $0.04 to $0.05 for the three months ended Sept. 30. 

Further information will be provided when the company reports its third quarter financial results, company officials added.

2 LHM dealers collect nearly 75K water bottles for the homeless

PHOENIX - 

Larry H. Miller Dealerships recently announced its Dodge Ram Peoria and Chrysler Jeep Avondale stores collected 74,996 bottles of water for the homeless after partnering with four local West Valley fire departments to host a community water drive.

The drive colleled water from June 1 through August 31, tripling the organizer’s initial 25,000 bottles goal, according to LHM.

“I’m blown away by how supportive and generous our employees, customers and the community have been in helping us to triple our initial goal,” Larry H. Miller Chrysler Jeep Avondale general manager Eric Ortega said in a news release. “It is truly rewarding to be able to help the homeless community with something as simple, yet vital, as bottled water during the scorching summer months.”

In addition to radio partners 102.5 KNIX-FM and 104.7 KISS-FM, which hosted remotes at locations throughout West Valley, several local businesses helped the drive surpass its goal by individually donating thousands of bottles of water.

The giving companies include: Firehouse Subs, iHeartMedia, Adesa Auto Auctions, Target, Homeowners Financial Group and Route One.

Additionally, Dodge Ram Peoria, Chrysler Jeep Avondale and 29 fire stations throughout Glendale, Peoria, Avondale and Surprise served as other collection sites for this year’s drive.

“We’re truly amazed and grateful for the amount of support we’ve received during this year’s water drive,” said Glendale Firefighter Charities executive director Cecil Tudor. “This was one of the hottest summers on record. Without the generosity of our neighbors and local businesses, we would not have been able to provide drinking water to as many at-risk individuals.”

CarMax Q2 earnings and retail sales jump by double digits

RICHMOND, Va. - 

CarMax posted double-digit increases in both net earnings and used vehicles retailed during the second quarter of its fiscal year.

And the company highlighted on Friday that CarMax achieved those results even though six stores in Houston were closed for a week because of Hurricane Harvey, creating a “modest adverse effect” on comparable store used-unit sales.

All told, CarMax retailed 186,019 units during the quarter that closed on Aug. 31, representing an 11.1-percent lift year-over-year. Halfway through its current fiscal year, CarMax stores have turned 381,292 units, producing a 12.6-percent improvement.

On a comparable store basis, the CarMax retail improvement wasn’t quite as robust, but still the company posted a healthy 5.3-percent year-over-year gain.

“The comparable store sales performance reflected continued solid improvement in conversion resulting from strong execution by our store teams and our digital initiatives,” the company said in a news release that accompanied its financial statement.

The metal rolling over the curb help CarMax generate a 9.7 percent rise net sales and operating revenues to $4.39 billion. As a result, net earnings increased 11.7 percent to $181.4 million and net earnings per diluted share rose 16.7 percent to $0.98.

The company calculated that its total gross profit increased 10.8 percent versus last year’s second quarter, climbing to $604.0 million. CarMax also highlighted its used-vehicle gross profit rose 12.0 percent, driven by the 11.1-percent increase in total used unit sales.

Used-vehicle gross profit per unit was consistent at $2,178 versus $2,160 in the prior year period.

On the wholesale front, CarMax sold 105,508 units through its auction channel during the second quarter, and halfway through the fiscal year the figure sits at 208,951 units. Both readings are nearly flat on a year-over-year comparison

Executives added wholesale vehicle gross profit increased 9.6 percent versus the prior year’s quarter, primarily due to an increase in wholesale vehicle gross profit per unit to $950 from $870.

“We believe this year’s second quarter wholesale gross profit per unit benefited from a favorable depreciation environment, relative to historical trends,” CarMax executive said. “Other gross profit increased 6.9 percent, primarily reflecting the changes in other sales and revenues.”

Also of note from the company’s latest financial performance, the company said CarMax Auto Finance (CAF) income increased 12.5 percent to $107.9 million. Average managed receivables grew 10.6 percent to $11.11 billion.

CAF indicated the total interest margin — which reflects the spread between interest and fees charged to consumers and the company’s funding costs, was 5.8 percent of average managed receivables compared with 5.9 percent in last year’s second quarter.

The provision for loan losses declined 7.8 percent to $32.9 million, compared with $35.7 million in the prior year quarter. The prior year’s provision was affected by unfavorable loss experience, while in the current year’s quarter, losses were generally consistent with expectations.

CAF went on to mention the allowance for contract losses as a percentage of ending managed receivables was 1.15 percent as of Aug. 31, compared with 1.18 percent reported as of May 31, and up from the 1.08 percnet reported as of Aug. 31,  of las year, “reflecting higher loss experience over the course of the last year,” according to the company.

Football legend Saban among NADA keynote speakers

TYSONS, Va.  - 

While NADA Show 2018 takes place during the height of college basketball’s March Madness championship run, one of its five keynote speakers has a few rings of his own from the college football world.

On Thursday, the National Automobile Dealers Association announced the keynote speakers for its annual convention, and Alabama football coach Nick Saban is among the quintet.

And appropriately enough, Saban has been involved in dealership ownership, so he will know his audience well. 

Keynoting NADA Show 2018, which takes places March 22 through March 25 in Las Vegas, are:

  • 2017 NADA chairman Mark Scarpelli (March 23)
  • Saban (March 23)
  • 2017 NADA vice chairman Wes Lutz (March 24)
  • Waymo chief executive officer John Krafcik (March 24)
  • Robert O'Neill, team leader at Naval Special Warfare Development Group (March 25)

“In addition to the keynote speakers, the NADA Show offers one of the best educational training and networking opportunities in the industry for both dealers and their managers — from participating in the workshop sessions covering all dealership departments, attending the dealer-franchise meetings to shopping for the latest products and services from hundreds of exhibitors," said Richard Stephens, NADA Show committee chairman, in a news release.

“Attendees will be among the first in the industry to find out what's new in the retail-auto industry and stay ahead of the competition,” he said.

Dealers and dealership managers can begin registering online Oct. 2. That includes an early-bird discount (which ends Nov. 17) an hotel selection.

For more information, visit www.nadashow.org.

LHM dealers raise $23,500 in school supplies for Colorado students

DENVER - 

Larry H. Miller Dealerships announced Wednesday that it collected nearly $23,500 in school supplies during the company’s “Stuff for Students” campaign this summer.

 Throughout August, 11 participating LHM dealerships’ stuffed a vehicle with much-needed school supplies.

In partnership with 9News, Volunteers of America Colorado Branch (VOA) and other business partners, the company collected enough supplies to benefit 60,000 students last month.

“We are fortunate to have a great team of partners like Larry H. Miller Dealerships who come together to support 'Stuff for Students' every year,” Volunteers of America Colorado Branch director of volunteer programs Bradley Gulley said in a news release.

“Thanks to the donations from Larry H. Miller Dealerships, their employees, and their customers, families can focus on school and not the financial burden of the cost of school supplies. These contributions will make a real difference in the communities we serve,” he continued.

Since 2015, LHM has donated an estimated $50,000 in school supplies, according to the group.

The cost of school supplies continues to increase and parents can often spend over $900 on supplies for a high school-aged student, according to VOA.

In the counties served by VOA, approximately 23 percent of the 743,255 students live in poverty, compared to the state average of just 14.7 percent, the organization said. 

The supplies from the “Stuff for Students” campaign go to students within more than 15 school districts who are in low-income households or homeless.

Additionally, just before the school year began for students, LHM also gifted a $5,000 grant to Operation Outreach-USA at Coronado Hills Elementary School to provide 450 books. The program aims to improve reading proficiency among students in kindergarten through fourth grade in low income and poor-performing schools.

CarMax kickstarts customer appreciation months for dealers

RICHMOND, Va. - 

As part of CarMax Auctions Customer Appreciation Months for registered dealers, customers can look forward to upcoming events filled with catered meals and giveaways.

Customer appreciation events are set to take place at each of the company’s 73 auction locations throughout September and October.

CarMax Murrieta, the company’s largest auction facility on the West Coast, in Murrieta, Calif., will host its inaugural customer appreciation event on Oct. 30. CarMax opened the new facility earlier this year.

The auction is anticipating an estimated 400 plus visitors to attend the inaugural event, according to CarMax.

“We look forward to celebrating our customers who have supported us since we opened our auctions facility in February,” CarMax Murrieta auction services location general manager Carlos Raygoza said in an email. “We value these relationships and are excited to hold this event in their honor.”

Additionally, CarMax Auctions are open to dealers only, and sales are held in a live, open bidding format.

Click here for a full schedule of events sorted by auction location.

Morrie’s Auto to open 5 new locations in Minn. & Wis.

MINNETONKA, Minn. - 

Morrie’s Automotive Group announced Wednesday plans to expand in the Midwest with the addition of five new locations and six new brands.

The new dealerships, which will be located in Minnesota and Wisconsin, will be opened by the end of 2018.

New locations will include:

  • Volkswagen La Crosse and Audi Lacrosse in La Crosse, Wis.(opening September)
  • Mercedes of St. Paul in Maplewood, Minn. (opening October)
  • Lincoln of West End in St. Louis Park, Minn. (opening January)
  • Jaguar Richfield and Land Rover Richfield in Richfield, Minn. (opening late 2018)
  • West Bend Honda in West Bend, Wis. (opening late 2018)

“Through this expansion we’re not just adding new dealerships, we’re bringing new jobs to our communities, adding trusted brands to our portfolio and introducing the Morrie’s Buy Happy approach of vehicle ownership to car buyers across Minnesota and Wisconsin,” Karl Schmidt, Morrie’s Automotive Group chief executive officer, said in a news release. “Our goal is to enhance the ownership experience and bring an evolved approach to doing business that today’s car buyers expect.”

Morrie’s growth will bring more than 225 new jobs and various development opportunities for current employees, according to the group.

Dealers embrace solar energy technology with SunPower

SAN JOSE, Calif. - 

Solar technology provider SunPower is now working with dealerships across the country to put empty rooftops and parking lots to better use with cost-saving, high-efficiency solar energy systems.

In addition to producing enough energy to significantly curtail dealership's electricity costs, SunPower said systems serve a dual purpose because solar panels can also protect what’s beneath them, such as roofs or a fleet of vehicles.

"It's no surprise that an increasing number of auto customers find solar to be a reliable, effective way to reduce electric bills while freeing up operating capital and improving their environment with emission-free energy," SunPower executive vice president Nam Nguyen said in a news release. "Through relentless innovation, SunPower has created smart, simple, and cost-effective solar systems that allow businesses in any industry maximize their investment, earning more savings over time."

In Minnesota, SunPower dealer Energy Concepts sold, designed and installed 454 kilowatts of solar across 10 locations of Luther Auto Group.

The group’s combined installations are projected to generate more than $2.1 million in electricity cost savings over 25 years, according to SunPower.

"Solar just makes good business sense in today's energy environment, and has become integral to many of our facilities' energy-efficient designs," said Linda McGinty, vice president of real estate at Luther Auto. "Over the last five years, we've worked with Energy Concepts to install over 450 kilowatts of high-efficiency SunPower solar at 10 of our dealerships across Minnesota, and have seen significant energy savings as a result."

Covert Auto of Texas currently has 125.6 kilowatts of solar installed on the roofs of the group’s Ford and Chevy dealerships in Hutto.

SunPower said the systems are expected to yield over $500,000 in energy savings over 25 years and meet 53 percent of Covert Auto’s current electricity needs.

Additionally, in Colorado, SunPower dealer Independent Power Systems installed more than 50 kilowatts of rooftop solar at Boulder Nissan.

When combined with the dealership's recent upgrade to LED lighting, the system currently meets 20 percent of Boulder Nissan’s electricity needs. The system is expected to generate $384,000 in energy savings over 25 years, according to SunPower.

"It's inspiring to help auto dealers see a return on their solar investment in five to seven years, with some becoming cash-flow positive in as little as one month," said Ryan Ferrero, chief executive officer of Ignyte Lab which partnered with Independent Power Systems. "When we can show auto dealership owners the financial benefits of using renewable energy and adopting sustainable business practices, high-quality solar energy solutions end up selling themselves. And with more than 17,000 new car dealers across the U.S., there's a huge opportunity to help more in the industry save on electricity costs with solar."

In addition to car dealers, SunPower also works with automakers like Toyota. At the Toyota Motor North America's new headquarters in Plano, Texas, the company said it is currently working with Toyota to install an 8.79-megawatt system that is expected to be the state’s largest corporate office on-site solar installation of a non-utility company.