Dealer Groups

CDK acquires program partner, dealer data analytics solution provider

HOFFMAN ESTATES, Ill. - 

CDK Global announced last week it has purchased partner program participant and full-service enterprise reporting company Dashboard Dealership Enterprises (DDE).

DDE has provided its business analytic reporting suite, Executive Eye, to some of the largest dealership groups in the U.S. and increased its customer base to 600 dealership locations within the last 15 years, according to CDK.

As part of the acquisition, DDE chief executive officer Josh Blick and chief operating officer William Page III will join CDK to help lead further development of Executive Eye.

The acquisition of DDE allows CDK to deliver a more robust reporting solution for dealers, the company said.

“We are excited to bring the capabilities of Dashboard Dealership Enterprises to our customers,” CDK president and chief executive Brian MacDonald said in a news release.

“By adding industry-leading dashboard and reporting capabilities, we will immediately help CDK customers effectively measure the success of their businesses. The company’s experience with many of the nation’s largest dealers also gives us great confidence in taking Executive Eye to our customer base,” he explained.

Additionally, Executive Eye will play a vital role in the company’s efforts to enable end-to-end automotive commerce and help dealers improve efficiency and profitability via metric reporting solutions, according to the company.

“We are very pleased to be able to join CDK and continue improving on the foundation we’ve built with Executive Eye,” added Blick. “The broad capabilities of CDK will help ensure we’re delivering even more value to customers.”

Group 1’s Q3 used sales tick 3.3 percent lower

HOUSTON - 

While contending with the ramifications of Hurricane Harvey, Group 1 Automotive watched its used-vehicle retail sales soften by 3.3 percent year-over-year during the third quarter.

According to its financial report released on Thursday, Group 1 stores in the U.S. turned 26,304 used vehicles during Q3. That’s down from the 27,201 used vehicles that the company’s stores during the same quarter a year ago.

While the unit figure ticked lower, Group 1 managed to keep its gross profit per used vehicle retailed nearly identical. In the third quarter, it was $1,443, while it stood at $1,441 a year earlier.

However in the F&I office, Group 1 sustained a slight drop-off there, too. F&I gross profit on all vehicles retailed dipped 1.4 percent to $1,566; that’s $22 less year-over-year.

The used-vehicle and F&I activities helped Group 1 to generate a Q3 net income figure of $29.9 million, diluted earnings per common share of $1.43, adjusted net income (a non-GAAP measure) of $46.6 million and adjusted diluted earnings per common share (a non-GAAP measure) of $2.23.

The company explained that Q3 adjusted net income and diluted earnings per share exclude approximately $16.8 million of net, after-tax adjustments, or $0.80 per share, for non-core items. Group 1 noted these adjustments primarily consist of costs directly associated with Hurricane Harvey of approximately $9.0 million after-tax, or $0.44 per share; and, franchise right impairments of $5.9 million after-tax, or $0.28 per share.

“While the company’s third-quarter results were negatively affected by both the non-recurring costs from Hurricane Harvey, as well as business disruption for more than a week across our largest revenue-generating market, strong demand for replacement vehicles in September provided significant financial recovery,” said Earl Hesterberg, Group 1's president and chief executive officer. “We expect this recovery to continue for a number of months, as the region continues to rebuild from Hurricane Harvey's widespread impact.

“Our overseas businesses were also positive factors in our third quarter results,” Hesterberg continued. “Although the U.K. new-vehicle market declined roughly nine percent in the third quarter, we significantly outperformed the industry with our same-store new vehicle unit sales rising 2.9 percent. Our used-vehicle and F&I businesses were up almost 10 percent driving a total same store revenue increase of 9 percent on a local currency basis.

“In Brazil, our operations delivered another quarter of profitability, with gross profit up 19.4 percent on a same-store constant currency basis, reflecting continued double-digit growth in used, aftersales and F&I,” he went on to say. “Our combined performance in all three markets delivered record revenues, gross profit, and adjusted earnings for the quarter.”

Editor’s note: More details from Group 1’s third-quarter activities will be highlighted in a future report.

After Q auto, 'energy has been refocused' at Asbury

DULUTH, Ga.  - 

When Asbury Automotive Group announced in July that it was discontinuing the Q auto standalone used-car store business, leadership emphasized this did not mean Asbury was scaling back on used cars.

Not by a long shot.

“With our investments in digital technologies and lead management initiatives, we have reassessed our brick-and-mortar investment in Q auto and made the decision to exit the remaining two locations,” chief operating officer David Hult said in a late-July conference call on Asbury’s second-quarter results.

“With this decision, we are not decreasing our emphasis on used-vehicle sales,” Hult said. “Rather, we are focusing our investments and resources on alternative routes to market that we believe will provide a superior return.

“Our attention to the used-car business is evident by the more-than-500-basis-point increase in our used-to-new ratio this quarter,” he said, referring to Q2.

Three months later, Asbury has been able to take some of the focus that had been on Q auto and shift it elsewhere, including the used-car operations of its core stores and the retailer’s digital processes.

“Naturally when we have a project like that on the side, it is a distraction for some of our leadership team to focus on that business,”Hult said in Tuesday’s third-quarter earnings call. “And there’s also cooperation with our stores from a shared-inventory standpoint.

“Now that the focus is back on our core stores and our core business both from a leadership perspective and keeping the units within the stores, we see this as opportunity to, again, increase our throughput with our current stores,” he said.

Asbury president and chief executive officer Craig Monaghan, whom Hult will succeed on Jan. 1, said beyond the in-store talent, Asbury’s technology team — particularly its digital department — had been putting many hours into Q auto.

Now, “that energy has been refocused and redirected to how we can compete tomorrow in the digital world,” Monaghan said.

“We’ll share more with you in the future about that, but that’s really where that initiative has refocused, on our approach to digital transactions in the future,” Monaghan said during the call. 

As it stands, between 4 percent and 5 percent of Asbury’s sales are done completely online, Hult said.

“We’re continuing to see progression in that area. It is opening up our channels in a lot of respects, but again it’s still to push the traffic back down to the store and (do) the transaction there, whether we’re delivering it at the store or delivering it at the people’s homes,” he said. “Progression has been solid the last few months and it continues to grow in that area.”

Earlier in the call, Hult was asked, given the Q auto shutdown, how Asbury was differentiating itself from its peers when it comes to its digital strategy.

Hult touched on the retailer’s previously discussed omni-channel approach, then noted: “We’re really focused on creating that transaction online, really getting consistent with our processes there and increasing sales that way. Our investment continues. We’re pleased with what we see so far, and see that as a core strength for us. Our goal, instead of creating more expense in brick and mortar, is to really create larger throughput through our stores, with centrally assisting the stores digitally and enhancing the transactions online.”
 

NADA report: Franchised dealers on pace for more workforce records

TYSONS, Va. - 

More workers making more money.

That’s the crux of the latest report from the National Automobile Dealers Association

Employment and payroll at franchised dealerships continued to rise through the first six months of 2017, according to a new midyear report released by NADA.

Officials tabulated that franchised dealerships directly employed 1,134,200 workers through the second quarter of this year, up from a record 1,131,900 in 2016, according to NADA Data 2017: Midyear Report, which provides a biannual financial profile of franchised dealerships, as well as data on employment, payroll and more.

“We expect to see employment at new-car dealerships reach an all-time high at the end of 2017,” NADA senior economist Patrick Manzi said in a news release. “In addition to the direct employment provided by dealerships, more than another million other jobs in local communities are dependent on dealerships.”

The report indicated payroll at franchised dealerships reached nearly $33 billion in June year-to-date, up more than 11 percent compared to the same six months in 2016.

The average compensation for employees at franchised dealerships was $69,784 per year in 2016.

“For the past several years, dealership employees have seen steady increases in their incomes as well as in their total compensation,” Manzi added. “Dealership jobs offer significantly higher compensation than other retail sectors.”

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.

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