Dealer Groups

Auto industry social media response rate high, but response time slow

CARY, N.C. - 

While automotive comes in as the industry least likely to be complained about in a top 10 list of industries most complained about on social media, the industry still has room to improve its response time, shows recent consumer data from Sprout Social.

“People don’t buy cars everyday — so while maintenance issues and product questions can pop up anytime, they may not have as much reason to negatively call out auto brands as they would for the CPG brand that, for example, makes the cereal they eat for breakfast every morning,” Sprout Social director of content Lizz Kannenberg said in an email interview.

“The potential payoff for complaining about your car is different than it is when you complain about your cereal; whereas you might get a coupon for a free box if you complain about your o’s or flakes, you’re unlikely to get a comparable ‘make good’ from an automaker.”

At 12 percent, the automotive industry average response rate on social is higher than the all-industry average at 11 percent. But among the list of 10 industries examined in the Q3 2017 Sprout Social Index, automotive also came in as the No. 6 industry needing the most help with social customer service.

“While the volume of consumer complaints may not be as high, people aren’t getting the responses they’re looking for when they do reach out,” Kannenberg said.

The auto industry’s average response time to consumers on social is 13.5 hours, the second longest average response rate out of 15 industries, according to the study.

“Responsiveness on social is crucial to how consumers view a particular brand. Think through how people are welcomed when they walk into your showroom, dealership or garage. You wouldn’t ignore them point-blank. Extend the same type of welcome to people who reach out to you on social to build the brand, and the customer relationships, that will pay dividends in terms of long-term loyalty,” Kannenberg explained.

Via Survata, an independent research firm in San Francisco, Sprout Social surveyed more than 1,000 consumers online between July 10 and July 14 for the study.

Spokane LHM dealerships to fund Thanksgiving dinner for less fortunate

SPOKANE, Wash. - 

Larry H. Miller Dealerships announced Monday that, for the fourth consecutive year, its Larry H. Miller Lexus, Larry H. Miller Downtown Toyota, Larry H. Miller Honda and Larry H. Miller Hyundai dealerships will fund the Union Gospel Mission’s annual City-Wide Thanksgiving Dinner for more than 1,000 homeless and low-income individuals and families.

In addition to a $5,000 donation, LHM said it will donate turkeys for every car sold or leased at the participating dealerships from this coming Thursday to Nov. 22.

Last year, LHM gave more than 150 turkeys to the Union Gospel Mission, according to the group.

This year’s dinner will be held at the Spokane Convention Center on Nov. 22 from 3:30 p.m. to 6:30 p.m.

“Our employees really look forward to supporting the City-Wide Thanksgiving Dinner each year,” Larry H. Miller Lexus Spokane general manager Bob McLean said in a news release.

“When they’re out shopping for their own Thanksgiving gathering, many of them will purchase an extra turkey to donate to the UGM dinner. In addition, we all enjoy volunteering together as a group to serve the dinner to our neighbors. It’s quite meaningful to see exactly how our donations help and who they help,” he continued.

“On a holiday that’s all about gratitude, we’re very thankful to Larry H. Miller Dealerships for underwriting the City-Wide Thanksgiving Dinner for the fourth year in a row,” Union Gospel Mission executive director Phil Altmeyer said. “They share our heart for this event, which is about showing people who feel down-and-out that they are valuable. Serving a special meal tells people that in a way words can’t express.”

The Union Gospel Mission has worked with underprivileged residents of Spokane since 1951.

In its more than 65 years, the organization has grown from a soup kitchen into a ministry made up of four shelters, two thrift stores, an automotive business and a summer camp for youth.

“It’s important to us to give back and support those who are less fortunate in our downtown neighborhood. We hope that partnering with the Union Gospel Mission in providing a warm meal and a special place to gather brings joy during the holiday season,” added Scott Brewer, general manager at Larry H. Miller Downtown Toyota Spokane.

Members of the public who would like to contribute to the dinner can donate online at or at any of the four participating dealerships.

CDK announces support for PCG's auto industry Google Analytics specification


CDK Global announced Friday that CDK websites will support the specification for Google Analytics that PCG Companies released for automotive dealers last year.

CDK dealers and dealer groups can now independently review website and marketing performance data from Google Analytics.

“We are excited to offer our dealers a standardized implementation of Google Analytics,” CDK Global product officer of consumer-facing products Max Steckler said in a news release.

“The demand for GA support from customers continues to grow, so it is the right time to meet that need and support this open standard. By leveraging the PCG specifications, our enterprise clients will be able to more easily compare the performance of our latest website technology and marketing solutions in their multi-vendor eco-system.”

The PCG specification provides dealer groups with a standardized set of measurement metrics across website platforms that can help dealers increase Return on Ad Spend from their marketing partners, according to CDK.

“Implementation of the PCG specification will be based on the CDK website data layer – a W3C specification for the uniform presentation of website data, which CDK supports with our responsive website platform,” the company said.

CDK joins a growing list of companies such as CarNow, which have recently publicly endorsed and implemented the PCG specification.

“By supporting a standardized implementation of Google Analytics, CDK demonstrates its willingness to increase data transparency with its clients. The PCG specification will allow dealers to more consistently document website conversions and engagement to improve marketing outcomes,” said Brian Pasch, founder of PCG Companies. “The support of the specification will also allow CDK clients to immediately leverage the independent data insights and traffic quality metrics in VistaDash, our popular Business Intelligence (BI) cloud software.”

This is the second specification published by PCG that has received widespread support from the automotive vendor community, according to CDK.

Details of 6-year journey to AutoNation-Waymo partnership


Much of AutoNation’s quarterly conference call included nearly every Wall Street observer who participated wanting more details about the dealer group’s partnership with self-driving technology company Waymo—part of Google's parent company Alphabet Inc.

To recap, AutoNation on Thursday announced a multi-year agreement to support Waymo’s autonomous vehicle program. AutoNation said it will offer strategic capabilities to maximize the life of Waymo's vehicles across the United States.

The company highlighted AutoNation franchised stores, AutoNation USA stores and other AutoNation locations, will provide long-term vehicle maintenance and repairs for Waymo’s self-driving Chrysler Pacifica hybrid vehicle fleet and will expand with Waymo as they add additional brands.

Having served more than 40 million customers and representing 33 brands, AutoNation believes it is uniquely positioned to work with Waymo as it expands its operations. AutoNation will offer complex mechanical and cosmetic repairs to maintain Waymo's self-driving fleet.

So how did the companies get to this point? That’s what AutoNation AutoNation chairman, chief executive officer and president Mike Jackson addressed first, sharing that he visited Waymo six years ago when it was GoogleX.

“I was probably one of the first industry people in the door, and had spent a day debating and discussing their approach to autonomous and had one of their earliest vehicles going down the 101,” Jackson said about his visit that included a journey along one of California’s famous highways.

From that point, Jackson said he interacted with Waymo at least once per year.

“I developed a deep admiration for the rigor and discipline of thought and principle,” Jackson said. “They had the whole approach to autonomy where you have to under-promise and over-deliver rather than over-promise and under-deliver when it comes to autonomy and safety.”

Then, Jackson encountered what he called “an epiphany” with regard to autonomous vehicles.

“I confirmed from my own experience and my understanding of customers that this idea that you can have an autonomous system that the driver has to supervise and be prepared to intervene at any moment doesn't really work,” Jackson recollected. “It’s almost against human nature that you have to pay strict attention and be prepared to intervene.

“So they said they don’t need 99.9 percent perfection, they need 100 percent perfection, which means you need redundancy, duplication and sophistication,” Jackson added.

Then entering the picture is Waymo chief executive officer John Krafcik, who already had a strong relationship with Jackson stemming from his days as one of top leaders for Hyundai.

“He and I had a running discussion that, obviously, these are some of the most sophisticated vehicles on the road and to realize the value of the investment in a vehicle, they need to perform at a high level for literally hundreds of thousands of miles,” Jackson said.

“And we both agreed that AutoNation was uniquely positioned to provide those capabilities, both with our scale and our expertise,” Jackson went on to say.

“So you put that together, you now have a strategic partnership to realize this vision of a shared vehicle that is operating autonomously, but at the highest levels of safety, and we think we have significant value,” Jackson added. “And I believe Waymo is the leader in this ambition to have a shared autonomous vehicle operate on a commercial basis with customers in the marketplace.”

In a news release announcing the partnership, Krafcik concurred with Jackson’s account of the relationship development.

“AutoNation has built a reputation for providing excellent service and maintenance that makes cars safer and more reliable,” Krafcik said. “Both companies have a shared vision of enhancing the in-car experience of our customers.

“With its compelling national footprint, modern facilities and trained technicians, AutoNation will help assure that Waymo vehicles are always in top condition as we bring fully self-driving cars to the public,” Krafcik continue.

And with Waymo’s self-driving hybrid vehicle fleet primarily made up of the Chrysler Pacifica at least for now, Fiat Chrysler Automobiles chief executive officer Sergio Marchionne applauded Jackson for making this move.

“As a long standing partner in vehicle sales and service for our brands, FCA commends AutoNation for preparing their operations to support the maintenance and service of autonomous vehicles, including the Chrysler Pacifica Minivans produced and developed for self-driving in collaboration between FCA and Waymo,” Marchionne said.

AutoNation praises One Price strategy for improved Q3 used sales


AutoNation chairman, chief executive officer and president Mike Jackson didn’t hesitate to point out the reason why the dealer group’s used-vehicle sales during the third quarter jumped 6.4 percent year-over-year.

AutoNation stores retailed 59,330 used vehicles during Q3, up from 55,760 units a year earlier. Jackson told investment analysts why stores moved more used metal when the company hosted its quarterly conference call on Thursday.

“I would say the AutoNation branded One Price experience for pre-owned drives tremendous traffic and interest through our website and through our stores,” Jackson said. “So the One Price sale has to be competitive in the marketplace.”

Announced last October, AutoNation explained One Price allows the company to leverage centralized capabilities, such as centralized pricing and appraisals, and offers consumers a “transparent and stress-free buying experience.”

AutoNation was to fully implement One Price in all existing locations by the end of the second quarter of this year.

While AutoNation turned more used vehicles year-over-year, the company’s gross profit per unit on those vehicles softened by $105 to settle at $1,414. Jackson addressed that metric, too.

“On the margin side, we have to have really strong operational execution. That was not there in the second quarter. We had some issues. I was very forthright about that. We've comprehensively addressed them, and yes, I see more stability in that going forward,” Jackson said.

“So that’s how I see it,” he continued. “The One Price is an experience and a brand attribute that customers like and draws us a lot of business. Sales associates are very enthusiastic about it, particularly millennials that we're now able to attract to work for us, so they don't have to negotiate.

“And then, we on the operating side have to bring in the gross margins. That’s the formula,” Jackson went on to say.

Also in connection with its retail performance, AutoNation watched its new-model sales figure dip 2.4 percent year-over-year in Q3, coming in at 86,192 units after it had been 88,322 units a year ago.

In the F&I office, AutoNation generated an extra $66 per unit in gross profit in that department as the metric rose to $1,660.

All told, AutoNation reported its Q3 net income from continuing operations came in at $98 million, or $1.00 per share. The company estimated that Hurricane Irma negatively impacted Q3 net income by approximately $8 million after taxes, or $0.08 per share.

Also during the third quarter, AutoNation repurchased 9.2 million shares of common stock for an aggregate purchase price of $400 million. As of Oct. 31, AutoNation has approximately $114 million remaining board authorization for share repurchase and 91 million shares outstanding.

Update on parts initiative

Also announced last year, the company offers AutoNation branded parts and accessories at AutoNation USA — standalone pre-owned vehicle sales and service centers.

A year ago when explaining the concept, the company emphasized AutoNation Precision Parts is a high quality, competitively priced line of maintenance and repair parts.

The new product line has been integrated into the company's reconditioning operations, and now enable improved customer retention for retail service, wholesale parts and collision repair business units, including AutoNation USA.

AutoNation Precision Parts was launched in the third quarter of last year in the company's existing stores, with the introduction of AutoNation-branded batteries that feature an industry-leading free lifetime replacement guarantee.

AutoNation Auto Gear, the company’s branded automotive accessory line, offers auto accessories for lifestyle, appearance, protection and vehicle security. AutoNation Auto Gear was also launched in the third quarter in the company's existing stores and is available at each AutoNation USA store.

The company plans to expand both AutoNation Precision Parts and AutoNation Auto Gear product lines in phases as their product portfolios are developed.

With all of those developments in motion, Jackson responded to an inquiry about how much pushback AutoNation has received from automakers.

“Yes, there’s been a discussion of course, and I say to them, ‘Look, if I go back 10 years ago, we had front-end gross on new vehicle sales of 8 percent, 9 percent, cost of 4 percent or 5 percent And today, we have front-end gross of 5 percent and new-vehicle sales is almost a commodity pass-through business and that we have to make all our profits somewhere other than selling the new car.’ Now, I have a franchise, so I've agreed that we will do tremendous volume on new vehicles.

“I understand that. That’s my responsibility,” he continued. “But then I say to the manufacturer, ‘By the way, it’s your stair steps and your margin programs that have brought us to this state, and you’re quite delighted with the fact that front-end gross margins are down to 5 percent. So you have to understand I’ve made this investment in this facility, and I need a way to grow and to do that profitably. And a lot of business that I gave you in the past for relationship reasons, just only for relationship reasons, and partnership reasons, no longer make sense with a front-end gross of 5 percent.’”

So is there a bitter divide between OEMs and AutoNation? Perhaps not.

“And the end of the conversation, I would say is I have earned their respect,” Jackson said. “And they said, ‘If I was in your shoes, I'd be doing the exact same thing and I guess. We don't have to worry about it too much, because who else can do it other than AutoNation?’

“So OK, and I'll take it. That’s fine with me,” he added.

Lithia moves closer to used-vehicle per dealership sales goal

Lithia Motors is moving closer to its used-vehicle sales goal.

In its third quarter that ended Sept. 30, the Medford, Ore., new-car dealership group retailed an average of 67 used cars and trucks per store, per month. That was up from 65 in the year-ago quarter, said its president Bryan DeBoer.

Lithia’s goal is to sell an average of 85 used-vehicles, per store, per month, DeBoer said.

Over the last several years Lithia has been on a buying spree, acquiring single-line dealerships and large dealership groups.

The dealerships it purchases are typically underperforming their potential and sell significantly fewer used vehicles than the 71 units per month average sold by stores Lithia has owned for more than two years. The typical dealership Lithia acquires sells about 38 used-vehicles per month, DeBoer said.

“We are making incremental progress towards our goal of 85 used units per store, more than offsetting the effect of acquisitions that sell fewer used vehicles than our seasoned stores do,” DeBoer said during the company’s quarterly earnings conference call in October.

“I think our opportunity is coming in the three- to eight-year-old vehicle, which is still somewhat depressed,” he said. “And that’s what’s going to really take us up to that next level and get to that 85 units per store.”

Three- to 8-year-old cars and trucks Lithia calls “core” vehicles generate a gross profit margin of about 12 percent, DeBoer said.

The company’s gross profit margin on certified vehicles is 8 percent to 9 percent and its “value” vehicles over 8 years old yield a gross profit margin of about 18 percent, he added.

Publicly held Lithia operates 166 dealerships, representing 30 vehicle brands in 18 states.

This year, Lithia has opened one dealership and acquired 15 others. Its latest acquisition is Downtown Los Angeles Auto Group in Los Angeles, which it purchased in its third quarter.

Lithia chief financial officer John North said the company anticipates buying more dealerships, especially if the seasonally adjusted selling rate plateaus or slows down.

“Conversely, if the SAAR is strong, it’s going to keep acquisitions maybe on the sidelines a bit more,” North added.

Revenue grows, net income drops

Lithia’s net income in the quarter that ended Sept. 30 dropped 4 percent to $51.9 million compared to the same quarter last year. But its revenue for the quarter grew 18.7 percent to $2.7 billion compared to last year.

Used-vehicle retail sales accounted for $679.6 million of that revenue, which was a 17.0-percent improvement over last year’s third-quarter results. The company retailed 34,737 used cars and trucks in the quarter, up 17.2 percent.

The average selling prices of a used car or truck at Lithia dealerships slipped 0.2 percent to $19,565 in the quarter, and the average gross profit per used unit retailed dropped 2.5 percent to $2,264.

Lithia’s same-store retail used-vehicle revenue was up 1 percent to $2.3 billion, same-store used retail sales grew 3.3 percent to 30,133 units and same-store average gross profit per vehicle retailed was up 1.1 percent to $2,364.

Same-store sales of certified used vehicles account for about a quarter of those sales but were “down a little bit” from July through September, DeBoer said.

In the quarter, same-store certified unit sales volume decreased 4 percent, core unit volume increased 7 percent and value auto unit volume increased 4 percent.

‘Mining core product’

“When certified are pretty plentiful, which they are now, they’re easy to find, which means we can spend our time on going and mining core product and value product, which is where we make all of our money,” DeBoer said.

As of Sept. 30, Lithia’s days’ supply of used vehicles stood at 63, up from 57 on the same day last year. North said the uptick in used-vehicle supply is a result of the company ramping up used inventory before cost of sales catches up.

“When you look at the aging overall, we’re really comfortable with where the level is,” North said. “We think that those are investments. That’s the incremental dry powder we’re trying to unlock.”

Lithia’s retail new-vehicle sales in the quarter grew 18.6 percent to 45,570, and average gross profit per new vehicle retailed dropped 2.1 percent to $1,932. The average new vehicle selling price rose 1.2 percent to $34,169.

Lithia reported that F&I revenue in the quarter was up 15.2 percent to $101.0 million and that average F&I gross profit per unit slid 2.4 percent to $1,258. F&I gross profit generated by recently acquired dealerships ranged from $800 to $1,100 per unit while it was “running north of $1,400 a copy” on Lithia’s more seasoned stores, said Christopher Holzshu, Lithia executive vice president and chief human resources officer.

Of the vehicles Lithia retailed in the quarter, it arranged financing on 72 percent, sold a service contract on 45 percent and sold a lifetime oil product on 26 percent, North said

Standalone used-car stores a big 'opportunity' for Penske


During the Q&A portion of Penske Automotive Group’s latest quarterly earnings call, chairman Rogers Penske was asked if his viewpoint on CarShop and CarSense had changed since the dealer group purchased the respective used-car standalone retailers.

 “Yeah, it’s changed. I like it more,” Penske said with a laugh.

“I think we’re very fortunate to get into this business,” he said. “The technology, the people. We’ve had no turnover with senior management. Both of these businesses, I think they applaud the fact we’ve come in with capital, with ideas, with an expansion mode offense.”

Fortunate and prudent, perhaps.  

Quarterly numbers, expansion plans

In the third quarter, Penske Automotive’s standalone used-car businesses — which include CarSense in the U.S. and CarShop in the U.K — retailed 11,626 units.

Year-to-date, which includes results since acquisition, the standalone platforms have retailed 30,952 used units.  

Quarterly revenue from the standalone stores in Q3 approached $200 million, while year-to-date revenue was at $535.7 million.

Gross profit per unit retail was at $1,152 in the quarter, with the year-to-date figure at $1,222.  

F&I gross profit per unit on these sales were $1,188 in Q3 and $1,182 year-to-date, putting the total variable gross profit per unit at $2,340 and $2,404, respectively.

“We believe these used-vehicle dealerships further diversify our business and provide an opportunity to capitalize on a highly fragmented used-vehicle marketplace. We also believe these businesses provide an unlimited white space for scalable expansion,” Penske said during the call. “We’ve identified several new markets for expansion of the CarSense and CarShop brands and are on track to double those number of locations within 24 months of the initial purchase.”

The group announced in early January it had signed an agreement to buy CarShop, a chain of five standalone used-car retail stores in the U.K. That deal ultimately closed in February.  Penske announced the purchase of US-based CarSense in December, then closed that purchase in January.

There are likely to be a handful or more of expansions from these two platforms.

In the U.S. in particular, CarSense will likely be “growing off that base” in Pennsylvania and New Jersey.

“The interesting thing is, when you look at those two businesses, take all the inventory out, probably the total net-book value of the fixed assets is probably around $5 or $6 million,” he said. “So we don’t have tens of millions of dollars of fixed assets … we have cash and we have cars and we have profit.”

Penske’s goal is to take what its learning from those standalone stores and see if it can be utilized in the retailer’s traditional business. However, the goal is not — or does not appear to be — to compete with CarMax.

Brushing aside any comparison to CarMax, Penske said that used-car giant exists in a “zip code that we’re not in.”

Penske’s goal, rather, is to go into areas that can be scalable for the company, where it has employees, and so forth.  

“What we’re trying to do is look at areas that we can go into, where we have scale and we have people that we could transfer from the traditional business into this business as we expand,” he said. “I’m very confident that we’ll see at least six, either through acquisition or new-store openings, take place in our two businesses next year.”

Fair investment

These standalone stores, of course, aren’t the only used-car projects on Penske’s radar.

Fair, an app that provides used-car leasing to consumers on a flexible basis, announced on Oct. 20 that it was closing a BMW i Ventures-led strategic funding round that also includes investments from Penske Automotive Group, among other strategic investors.

In a news release, Fair founder and chief executive officer Scott Painter said the company will utilize Penske’s physical infrastructure.

In the same release, Penske president Robert Kurnick said: “Penske is committed to be on the leading edge of technology, and our investment with Fair reflects that commitment. The potential appeal of the Fair app to consumers is compelling while keeping our company at the forefront of bringing mobility solutions to the marketplace.”

During the quarterly call, Roger Penske also discussed the Fair investment.  

“We’ve invested $1.2 million, less than 1-percent ownership. We think this is an interesting startup,” he said. “You’re seeing GM and Ford and all these other people investing in some of these different business ventures and ideas, so we’re going to learn from this one and see if there’s any way that this might have an application to us at this particular time.”

Penske added that the company is exploring making $1 million to $5 million investments in similar projects like ride-sharing over the next 12 months.






Sonic’s EchoPark used-car stores: cash-positive, in line with expectations


Sonic Automotive’s newest EchoPark used-car store in Colorado Springs, Colo., was “cash positive” in its third month of operation — about six months ahead of when the company’s initial EchoPark stores reached cash positive positions, said Sonic president Scott Smith.

“EchoPark results were in line with expectations,” Smith said during the company’s third-quarter earnings call in October. “Our store platform in Colorado was again cash flow positive during the third quarter and moving towards overall profitability.”

The Colorado Springs EchoPark store opened in June.

Smith also said the dealership group plans to open 10 more EchoPark stores by the end of 2018.

Those stores are slated for Florida, Georgia, North Carolina, South Carolina and the Texas markets of Dallas-Fort Worth, San Antonio, Houston and Austin.

Sonic’s pre-owned stores segment, which includes its six EchoPark stores, all in Colorado, and its two non-EchoPark stores in Florida and Texas, retailed 2,400 used units in the quarter, up 815 units, or 51.4 percent, the company said.

Used-vehicle gross profit per unit retailed at Sonic’s pre-owned stores decreased 24.3 percent to $830, “due primarily to higher costs of acquisition of inventory at auction as the company ramped up inventory at our newest locations,” according to a document Sonic filed with the federal government.

Jeff Dyke, Sonic executive vice president of operations, said Sonic remains committed to establishing EchoPark as a national brand capable of going head-to-head with used-car retailing giant CarMax Inc.

Sonic opened its first EchoPark used-only store in November 2014 in Denver.

“I can’t put a time line on when we’d be at the same level of stores as CarMax, but certainly our goal is to build a brand that will compete with them,” Dyke said during a telephone interview immediately following Sonic’s earnings call.

“They’re kind of by themselves — from our perspective — across the country, and there’s plenty of room in that space. We think there is lots of upside, and that’s our target.”

A national brand

As Sonic adds more EchoPark stores and establishes its national brand, look for stores to open in markets where Sonic does not have a new-car store presence, Dyke said.

“That’s been our intention all along, and we are growing as quickly and efficiently as we can,” Dyke said during the earnings call. “You can expect to see an EchoPark in most of the major metros and used-car markets across the country.”

Headquartered in Charlotte, N.C., publicly-held Sonic Automotive on Sept. 30 operated 104 new-car dealerships in 13 states, representing 25 brands.

CarMax of Richmond, Va., also publicly-held, is the nation’s largest retailer of used vehicles with over 180 used-vehicle stores in 39 states. It retailed 671,294 used cars and trucks in its most recent fiscal year that ended Feb. 28, 2017.

Dyke said EchoPark has been “very” successful in its mission to purchase from consumers many of the used cars and trucks vehicles it sells, but would not provide details.

“We don’t want to give out too much information, but we’ve had some really nice short-term success with EchoPark,” Dyke said. “We want to keep watching the brand grow. As we become more successful, we’ll share more information.”

Sonic’s used-vehicle days’ supply stood at 38, down from 41 in the third quarter of 2016.

Smith said he expects used-vehicle days’ supply “on the Sonic side” to continue to drop through the end of the year, and inventory will be added as new EchoPark stores open.

A “challenging” quarter

In its third quarter that ended Sept. 30, Sonic’s revenue dropped 2 percent to $2.51 billion compared to last year’s third quarter.

Smith said the hurricanes that hit Texas in August and the southeast in September made the quarter “challenging” from an operational standpoint.

Hurricane Irma either temporarily closed or impacted to varying degrees 24 new-car dealerships in Sonic’s Alabama, Florida and Georgia markets; Hurricane Harvey temporarily closed 19 new-car dealerships and five collision repair centers in its Houston market.

The BMW brand is “at the bottom of their cycle in terms of product” said Dyke, explaining that the company’s BMW dealerships in its Houston market were already struggling prior to the hurricane.

BMW is “30 percent of our profit mix, and when they struggle its more difficult for us to overcome,” Dyke added.

But despite those headwinds, Sonic’s net income increased 7.3 percent to $19.4 million in the quarter, and its gross profit increased 1 percent to $362.6 million.

Sonic’s financial results were boosted by its F&I revenue, which was up 3.7 percent to $92.9 million and its F&I gross profit per retail unit, excluding fleet, which was up 4.8 percent to $1,408.

Sonic’s overall used-unit sales dipped 0.3 percent to 30,841, and its revenue per used unit was up 0.1 percent to $21,391 compared to the year-ago quarter. Gross profit per used unit was down 0.9 percent to $1,269.

Sonic’s same store used-unit sales dropped 2.3 percent to 29,854, revenue per used unit rose 0.2 percent to $21,471, and its gross profit per used unit declined 1.1 percent to $1,224.

CarMax names next COO


CarMax chief operating officer Cliff Wood will retire by the end of next summer, the company said Monday.

Taking on the COO role at that point will be Ed Hill, who has been CarMax’s executive vice president, strategy and business transformation since 2016.

Wood has been with the company since 1993, when he was a buyer at the first CarMax location in Richmond, Va.

“Cliff has been instrumental in building CarMax’s industry-leading store operations,” said Bill Nash, CarMax president and chief executive officer, in a news release. “He has helped guide the company successfully through many years of growth and has built a strong field leadership team.

“We are incredibly grateful for his many years of service and contributions to CarMax’s success.”

Hill, meanwhile, has been with the company since 1995, when he came aboard as director of service operations, eventually becoming senior vice president in 2012 and leading corporate strategy.

“Ed was the driving force behind the development and ongoing enhancement of our vehicle reconditioning process, one of CarMax’s key competitive advantages,” Nash said. “He has been an integral member of the executive leadership team, and his breadth of experience in operations, corporate strategy and enterprise change management will be essential for our future growth.”

In moves effective Wednesday, CarMax said Darren Newberry will be promoted from vice president of regional sales to senior vice president of store operations, and Joe Wilson is being promoted from vice president of merchandising operations to senior vice president, store strategy and logistics.

UK fuels Group 1’s Q3 international performance


While Group 1 Automotive watched some rebounding happen in Texas, the dealer group also cheered what’s occurring on its international fronts, especially in the United Kingdom.

As the nation’s new-vehicle sales declined nearly 9 percent as a whole during the third quarter, Group 1 posted a 2.9-percent sales increase on a same-store basis.

Also of note, Group 1 watched its total used-vehicle gross profit rise by 22.2 percent.

Furthermore, Group 1’s operations in the U.K. generated a 10.6-percent increase in aftersales gross profit along with a 9.8-percent lift in F&I gross profit.

“We are in an emerging company in the U.K., and we are quite a strong emerging company,” Group 1 president and chief executive officer Earl Hesterberg said during the company’s latest conference call. “We have a pretty good brand mix. The power in the third quarter came from our Audi business and our Ford business. And we are now broadening our brand exposure a bit. The most recent acquisition has put us into the Volkswagen network, the Toyota network, and we’re becoming reasonably significant Jaguar-Land Rover dealerships.

“So we are getting some scale now. We have some power. And this always has been a good business for us,” Hesterberg continued. “But over the last two years, we have made two acquisitions of about a dozen stores each. So, now, we’ve got some muscle, and we’ve got a very capable team. And I think that’s how we’re able to outperform the market.

All told, Group 1 has 3,000 employees, 43 dealerships and $2 billion per year in annual revenues germinating out of the U.K.

“I have been able to spend a lot of time over there. It’s not a small business anymore. And I think we can continue to outperform the market there,” Hesterberg said. “We have some stores that don’t perform well and we’ve got to improve those or get rid of them. I think that U.K. is a very positive story for Group 1 and I don’t think it’s a one-quarter phenomenon.”

Down in Brazil, Group 1 calculated that its South American operations accounted for 4.0 percent of total revenues and 3.3 percent of total gross profit.

The company reported that total same-store revenue grew 14.0 percent and total same-store gross profit increased 22.4 percent, reflecting strong growth in same-store total used-vehicle gross profit of 27.7 percent and a 30.9-percent rise in same-store aftersales gross profit.

In addition, Group 1’s Brazilian same-store F&I gross profit per unit jumped 30.6 percent.

“Through the economic downturn in Brazil, which is what probably has been since the first day we went there, we have downsized that business to get the weak parts and the bad parts out. And we know have a very strong core of business,” Hesterberg said. “We’re the largest Honda retailer in the country, good Toyota business and I think we are the second largest Land Rover and BMW group in Brazil. We have 16 dealerships. We also have Mercedes dealership there I should mention.

“We would benefit significantly from more scale there. We have an incredible management team there that we have developed, good local team, and we’ve got great brand mix, but we could use some more muscle amount, some more scale,” Hesterberg went on to say. “I’m going to work on that.”