Same-store used-vehicle sales for the six publicly traded dealer groups fell a combined 11.2% year-over-year in the first half of 2020, Cox Automotive data shows, but there is still a silver lining to take away from that metric.
Pre-owned operations for the public retailers are faring better than their new-car sales, and their decline in used-car sales is less steep than the overall’s market, according to a Data Point report from Cox released last week.
More specifically, the aforementioned 11.2% drop in same-store used sales for the publics compares to a 21.8% slide in their same-store new-vehicle sales.
Meanwhile, there was a 17% decline in used sales for the overall market, Cox Automotive said.
“The shift in vehicle demand, away from new and toward used, is clearly reflected in the 1H financial reporting of the largest players in the auto industry: franchised dealer groups … Looking at the 1H performances of these publicly traded dealer groups, the trend in our industry is crystal clear: Sales are down, but the used market is performing better than new,” the company said.
And some groups are leaning into their used-car operations.
At Sonic Automotive, one of the six publicly traded groups, its franchised dealerships had same-store retail used-vehicle sales of 49,871 units in the first half, a decline of 5.2%.
However, first-half same-store used sales for its EchoPark Automotive pre-owned stores climbed 4.8% in the first half, reaching 24,783 units sold.
“EchoPark has continued to see a v-shaped recovery in sales volume and improved profitability, surpassing our original pre-pandemic forecasts for the month of June. For the second quarter, EchoPark segment income increased 52%, demonstrating the leverage and profit potential of this model,” Sonic and EchoPark president Jeff Dyke said in an earnings release.
“Based on the significant success of EchoPark, we are accelerating EchoPark’s expansion. We expect EchoPark to sell over half a million vehicles annually by 2025, through a 140-point nationwide distribution network and expanded e-commerce capabilities, generating incremental revenue in excess of $10 billion annually.”
Meanwhile, AutoNation said in its quarterly earnings release it would be adding at least 20 stores in the next three years to its AutoNation USA standalone used-car program.
And last week, the retailer appointed a president for AutoNation USA, moving current Western Region president Steve Kwak to that position.
“We see an opportunity to take a larger share of the used vehicle market and benefit from the increased interest in vehicle ownership by our customers. AutoNation's strong brand, first-class digital capabilities, and One Price pricing strategy, combined with lower acquisition cost and stable used vehicle retail pricing make AutoNation USA stores an attractive opportunity,” AutoNation chairman and chief executive officer Mike Jackson said in a news release.
AutoNation retailed 114,935 used vehicles on a same-store basis in the first half, down from 120,698 a year ago.
Same-store used sales actually increased slightly for Lithia Motors, which moved 81,094 pre-owned units for a 0.2% gain, according to company earnings.
Back in July, Lithia said it generated around a 23% year-over-year spike in same-store used-vehicle unit sales during June, which was a record month in pre-owned for the retailer.
Cox Automotive analysts added in their report: “In total, the large dealer groups are selling more used units, which follows general industry guidelines for dealer operations. How much they can skew to used-vehicle sales is contingent on used-vehicle supply and pricing.”
In addition to announcing that it would be shuttering its AutoNation Collision Parts business by year’s end, AutoNation also shared some news from its pre-owned operations on Wednesday.
The retailer appointed a president for AutoNation USA chain of standalone used-car stores, moving current Western Region president Steve Kwak to that position.
The company is making a big push to expand AutoNation USA, with 20 store additions planned for the next three years.
“We see an opportunity to take a larger share of the used vehicle market and benefit from the increased interest in vehicle ownership by our customers. AutoNation's strong brand, first-class digital capabilities, and One Price pricing strategy, combined with lower acquisition cost and stable used vehicle retail pricing make AutoNation USA stores an attractive opportunity,” AutoNation chairman and chief executive officer Mike Jackson said in a news release.
As far as the ACP business, AutoNation said this segment had less than a 1% share of the company’s parts and service gross profit in the first half of the year. The retailer does plan on continuing its PrecisionParts business.
That segment includes branded maintenance and repair parts sales.
Jim Ellis Automotive Group understands that school supplies do not include just bookbags, paper and writing utensils nowadays.
In response to the shortage of personal protective equipment (PPE) available to teachers and students in the Atlanta area, Jim Ellis announced on Tuesday that the dealer group will be donating a portion of every sale of all new or pre-owned vehicles to Atlanta Beats Covid (ABC) during its upcoming Labor Day sales event.
The event will take place from Aug. 31 through Sept. 7 as all 18 Jim Ellis family-owned and operated dealerships will participate.
“As we enter a new school year in the midst of a pandemic, teachers and educational staff are having to navigate unchartered territories,” the Jim Ellis Automotive Group said in a news release. “Teachers are currently going into their schools to plan curriculum, setup their classrooms and meet with other staff members, all in a potentially vulnerable environment.
“Unfortunately, many schools are not able to provide educators or students with face shields, masks or other PPE. Many schools and teachers also encounter difficulties getting their hands on PPE due to a nationwide shortage and shipping delays,” the group continued.
ABC is an ad-hoc group of volunteer makers, engineers, fabricators, seamsters and other Southeast industry experts that was founded to address the huge PPE shortage facing our medical workers and has now expanded to help our educators during the COVID-19 pandemic.
Since March, ABC has provided over 28,000 pieces of PPE to the Atlanta community and 2,357 face shields to area schools since July.
“We’re honored and excited to team up with Atlanta Beats Covid to provide face shields for teachers through our Labor Day sales event,” said Stacey Ellis, vice president of Jim Ellis Automotive Group. “Our hope is that we can help provide comfort and safety to those doing the important job of teaching our children.”
During the holiday sales event, prospective buyers can shop in-person or at any one of the 18 Jim Ellis family-owned and operated dealerships. Shoppers also have the option to shop from home using the Jim Ellis Express Way.
With the Jim Ellis Express Way, shoppers can search and compare thousands of vehicles in the entire Jim Ellis dealership network from their phone, computer or tablet. Shoppers also can configure their payment, value their trade, secure financing and more.
At-home services allow potential buyers to complete the entire purchase without ever visiting a dealership — including the option to submit all paperwork electronically, complete a test drive and take delivery of the vehicle at home.
For more information about ABC, request PPE or to donate, visit https://atlantabeatscovid.com/.
With social distancing the new COVID-19 norm for dealerships and other retailers and public spaces, some of the features of the new Mercedes-Benz dealership that Baker Motor Co. wants to open by the end of the year might be even more valuable.
Stretching over 13 acres at 425 Sigma Drive off Interstate 26 in Summerville, S.C., Baker highlighted its planned dealership is designed to be a nice place to relax or entertain customers while waiting on their vehicles to be serviced. It includes walking and biking trails, a kiddie-land play area and a pond for fishing.
The company said the site will also include a car wash for all Baker Motor Co. clients, an eight-car showroom, consultation desks, conference rooms and lounges. The interior design is fully open with screens separating different sections.
The new campus will also incorporate The Baker Collection, a grouping of 12 luxury brands found previously only on Savannah Highway. These ex-loaner vehicles will have been gently used with low miles on them.
“All of them will be the current model year,” Baker said in a news release.
Each section in the area will have its own names such as Mercedes-Benz Lane or Land Rover Boulevard.
Baker said plans for the property include a fully landscaped drive akin to Azalea Drive, the road leading into Augusta National Golf Course in Georgia.
The dealership plans to open this facility in December.
The privately held Baker Motor Co. operates dealerships for 14 luxury brands including Rolls-Royce, BMW, Maserati, Alfa Romeo, Porsche, Land Rover, Jaguar, Smart Car, Mercedes-Benz, Sprinter, Infiniti, Buick, GMC and Cadillac.
Sonic Automotive has added a top executive from the Children’s Health System of Texas to its board of directors.
The retailer announced Tuesday that Keri Kaiser, the chief marketing officer and chief experience officer at Children’s Health, is joining its board.
Kaiser’s background includes more than 25 years of experience, including executive posts across various industries.
“Sonic Automotive is honored to have Keri join our board, during this exciting time for the company,” Sonic chief exeucitve officer and director David Smith said in a news release. “Keri’s executive leadership overseeing transformation initiatives at high-growth organizations will prove invaluable as Sonic Automotive’s EchoPark brand continues its strategic expansion across the United States.”
Kaiser has been with Children’s Health since 2012. She was previously the chief revenue officer for the AT&T Performing Arts Center in Dallas, and her experience also includes co-founding Velocity Ventures, working in brand management at Frito-Lay and time as a founding member of Price Waterhouse's Strategic Management Consulting Group.
“Sonic Automotive’s leadership as an automotive retailer, with disciplined management and strong fundamentals, have enabled the company to rapidly build out its EchoPark brand and position it for sustainable, strategic growth,” said Kaiser. “As director, I look forward to helping shape the company’s growth strategy so that it can continue to achieve strong performance quarter after quarter, and deliver stockholder value.”
Seems like a summer of sequels for dealership acquisitions.
While blockbusters aren’t driving folks to theaters these days, movie star Mark Wahlberg continues to add to the coffers of a different line in his business portfolio.
Less than a month after it was announced the actor/producer and his business partner, Jay Feldman, had purchased two dealerships in Columbus, Ohio, the pair purchased another store in town: Jack Maxton Chevrolet.
The store is being renamed Mark Wahlberg Chevrolet of Worthington.
Wahlberg and Feldman now have four stores in Columbus. Others include Mark Wahlberg Buick GMC and Mark Wahlberg Airstream & RV (the two purchases from last month) and Mark Wahlberg Chevrolet, which was their first store in 2018.
“The people of Columbus have been good to us,” Wahlberg said in a news release. “This latest acquisition just strengthens our roots and deepens our bond with the market.”
Feldman added, “Having four dealerships in Columbus gives us the opportunity to provide consumers with a consistent sales and service experience.
“The Mark Wahlberg imprint on four locations enables us to leverage the Wahlberg advantage of providing brand choices, offering huge selection at the lowest prices and delivering great customer service,” he said.
Jeff Mauk, who previously owned the dealership, said: “The Maxton name has been on that Chevy dealership for 90 years. I know the current and future customers are in good hands with Mark and Jay at the helm.”
Further West, Lithia Motors made it a Texas-sized sequel with the purchase of four John Eagle Dealerships stores in Dallas and Austin: John Eagle Honda of Dallas, Honda Cars of Rockwall, Howdy Honda of Austin and John Eagle Sports City Toyota.
Just last week, Lithia announced it had purchased BMW of San Francisco, which followed the addition of DCH Subaru of Thousand Oaks, Calif. in mid-July.
Earlier in the month, Lithia announced it acquired Smolich Chrysler Jeep Dodge Ram and Nissan dealerships in Bend, Ore.
“We’re delighted to announce our network expansion in two of the largest markets in our logistically key South-Central region,” Lithia president and chief executive officer Bryan DeBoer said of the Texas additions in a news release Tuesday.
“We’re excited to welcome these high-performing teams to the Lithia family. Their reputation in their communities and extraordinary volume reflect a commitment to an exceptional customer experience,” DeBoer said.
The four stores are expected to add $500 million in annualized revenues. Lithia financed the purchase through free cash flows and existing on-balance sheet capacity.
“The acceleration of our plan to increase the reach and density of our network to more conveniently serve our customers is well underway,” DeBoer said. “Together, with our Driveway ecommerce digital home channel, we are providing personal transportation solutions wherever, whenever and however consumers desire.”
Sonic Automotive’s line of standalone used-car stores proved to be a major bright spot during the second quarter, as EchoPark Automotive notched a 52% year-over-year hike in segment income, the retailer said Thursday in its Q2 earnings release.
Saying such a gain underscores “the leverage and profit potential of this model,” Sonic and EchoPark president Jeff Dyke said the company plans to quicken expansion plans for the used-car stores.
The retailer is eyeing more than 500,000 annual sales for EchoPark by 2025, along with a national distribution network of 140 points and a more robust e-commerce presence.
With regards to the latter, Sonic is partnering with Cox Automotive and Darwin Automotive to build an e-commerce platform and user interface designed to “accelerate our EchoPark expansion plans and elevate the online retail guest experience on our franchised dealership websites and EchoPark.com beginning in the fourth quarter of 2020,” Sonic and EchoPark chief executive David Smith said in the earnings release.
As for the most recent period, Sonic reported $2.6 million in EchoPark segment income in Q2, beating year-ago figures by the aforementioned 52%. EchoPark’s revenue for the quarter was at $315.3 million, an 8% uptick.
The used-car standalone stores moved 13,207 retail used units for the quarter, a 5% hike.
Looking at the franchised dealership operations of Sonic, its same-store used-car sales fell 12% year-over-year. Sonic made 14% lower gross profit per unit on those sales ($1,122).
“I am extremely proud of the way our team has responded to the challenges of the past few months and the positive impact they have had on our business. EchoPark has continued to see a v-shaped recovery in sales volume and improved profitability, surpassing our original pre-pandemic forecasts for the month of June,” Dyke said in a news release.
“For the second quarter, EchoPark segment income increased 52%, demonstrating the leverage and profit potential of this model. Based on the significant success of EchoPark, we are accelerating EchoPark’s expansion,” he said. “We expect EchoPark to sell over half a million vehicles annually by 2025, through a 140-point nationwide distribution network and expanded e-commerce capabilities, generating incremental revenue in excess of $10 billion annually.”
This week, the footprint of the Sewell Automotive Companies in the Lone Star State became even larger thanks to involvement by the Presidio Group.
According to a news release from the investment bank specializing in retail automotive and related M&A transactions, Park Place Dealerships completed the sale of Jaguar North Austin and Land Rover North Austin in Austin, Texas to Sewell Automotive.
“We admire the Park Place organization and we are proud to share many of the same core values including our care for our customers, employees and communities,” Sewell chairman and chief executive officer Carl Sewell said.
“We have been serving Texans for over 100 years and we are grateful for this incredible opportunity to now serve Austin and to add the Jaguar and Land Rover brands to our portfolio of outstanding franchise partners,” Sewell continued.
This transaction is the second one involving Park Place this month as the organization revised terms for a move involving Asbury Autmotive Group. Ken Schnitzer, chairman of Park Place Dealerships, described how this deal with Sewell came together.
“The Sewell family is known for operating its dealerships at the highest level. I am confident they will continue to care for the customers and employees of our Austin JLR business,” Schnitzer said.
“The Presidio Group’s expertise was essential to helping us find the best buyer and execute this transaction in the middle of the major disruption caused by COVID-19,” he added.
Leadership from the Presidio Group added these perspectives.
Founder and CEO Brodie Cobb said, “We have worked with Ken Schnitzer for many years and we're honored to work with him on this transaction.
President George Karolis added, “Park Place Dealerships and Sewell Automotive Companies are both iconic family-owned Texas dealership groups renowned for their customer service."
The Presidio Group provided exclusive M&A advisory services to Park Place through its wholly owned investment bank, Presidio Merchant Partners.
On Wednesday, Lithia Motors continued what has already been a busy second half of expansion for the dealer group.
The retailer said it has purchased BMW of San Francisco, a dealership it projects will bring $210 million in annual revenues.
“We’re very pleased to announce that we have expanded our network in our Southwest Region with BMW of San Francisco,” Lithia president and chief executive officer Bryan DeBoer said in a news release.
“This purchase brings our annual network revenue expansion thus far in 2020 to over $500 million annually, increasing our network density to more conveniently reach our customers,” he said.
Lithia noted that it financed the purchase through free cash flows and existing on-balance sheet capacity.
DeBoer added: “We’re very excited to welcome the talented team of BMW of San Francisco to the Lithia family. Their passion for BMW and their enthusiasm for technology is geared perfectly for the digitally and sustainably sophisticated customers of this region.
“We’re eager to partner with them to provide the ultimate customer experience, including at home and at work convenience,” he said.
This marked the second purchase Lithia has made in California this month, in addition to two stores it bought in Oregon.
On July 14, Lithia announced it brought DCH Subaru of Thousand Oaks, Calif., into the fold.
The retailer anticipates DCH Subaru will add $60 million to Lithia’s annual revenue.
“We’re excited to welcome another high-performing team to the Lithia family,” DeBoer said in the mid-July news release.
“This addition kicks off a series of acquisitions planned for the second half of the year, accelerating our plan to reach five percent national market share,” DeBoer said.
Earlier in July, Lithia announced it acquired Smolich Chrysler Jeep Dodge Ram and Nissan dealerships in Bend, Ore.
Lithia, which is headquartered some three hours away in Medford, Ore., said the acquired stores are likely to pull in steady state annualized revenues of $100 million.
Asbury Automotive Group set a used-car record during the second quarter: a fifth of its pre-owned sales were done online.
Announcing quarterly results Tuesday, Asbury had a couple other used-car strong points during Q2, including a 10% hike in average used-vehicle retail gross profit per unit and a 60 basis-point increase in gross margins on used retail.
Used-car retail revenue was down 15% year-over-year at $412.6 million. Asbury reported wholesale used-car revenue of $34.9 million, a 26% decrease. Total used revenue was $447.5 million, a 16% decline.
Total used-vehicle gross profits were up 3% at $37.1 million for the quarter. However, retail used gross profits were down 9% at $31.6 million. On the wholesale side, gross profits climbed from $1.2 million to $5.5 million.
Asbury retailed 18,400 used vehicles during the quarter, which was down 17% year-over-year.
The used-to-new ratio climbed from 84.2% to 91.7%.
Moving to average gross profit per unit, this came in at $1,717 for used retail, beating year-ago figures by 10%.
Used-vehicle retail gross margins climbed from 7.1% to 7.7%.
Moving over to year-to-date results, used retail revenue was down 9% at $858.6 million, wholesale revenue was down 17% at $82.1 million and total used revenue was off 10% at $940.7 million.
Used retail gross profits for the first half were at $62.8 million, down 8%. Wholesale gross profits were at $5.0 million, up from $2.1 million a year ago.
Total used gross profits were down 4% at $67.8 million.
Asbury retailed 38,687 used vehicles in the first half, down 11% year-over-year.
The used-to-new ratio climbed from 85.7% to 92.0%.
Average gross profit per unit on used retail sales was $1,623 for the first half, up 3% year-over-year.
Used retail gross margins climbed from 7.2% to 7.3%.
Offering some overall commentary, Asbury president and chief executive officer David Hult said in a news release: “We delivered a very strong quarter and proved out the resilience and the flexibility of our business model by delivering a record operating margin of 5.7% and a record low SG&A as a percentage of gross profit of 62.7% in an 11.3 million SAAR environment.
“Our focus on gross profit combined with our cost restructuring efforts allowed us to remain pro-active and committed to long term growth by moving forward with acquiring 12 Park Place luxury franchises in the Dallas Fort Worth Market under more favorable terms than the prior agreement,” he said. “This acquisition will add approximately $1.7 billion in expected annualized revenues and transform our total portfolio to 49% luxury stores. With the addition of Park Place, Asbury will be a stronger, more diversified company.
“Finally, I want to thank our teammates across our store network for their unwavering commitment and emphasis on safety during this pandemic; our performance is a direct result of their hard work and service.”
