Group 1 Automotive’s second quarter, from the perspective of used vehicles retailed in the United States, was solid.
Overall unit sales were up 18.2 percent. Revenue and gross profit were up on an overall used-vehicle retail basis, as well.
But there was at least one retail used-vehicle metric that the dealer group’s president and chief executive officer, Earl J. Hesterberg, was not satisfied – the gross margins. Looking at worldwide data for the second quarter, used-vehicle retail sales gross margin percentages were down from 7.9 percent in 2014 to 6.8 percent this year. There was a similar result in the U.S., where margins by the same metric were down from 8.2 percent to 7 percent.
“I’m not exactly sure how you should model it, but I do think it was one of our weaker areas of performance in the quarter,” Hesterberg said. “I don’t think we did a good job. We’ve had 23 days to work on this so we spent a lot of time on it and my impression is that with the improved availability of used vehicles, that we bought a little heavy and also that in some of our oil-challenged markets that there may have been a little bit of shift from new to used, and I think we had too many cars for the quarter.”
Hesterberg noted that although the margins aren’t where he’d like them to be, he was still satisfied with his dealers’ ability to offload vehicles in a timely nature.
“You’ll note from our inventory level – 32 days’ supply – we don’t hold onto these things,” Hesterberg said. “We have a discipline that encourages our people to liquidate these things one way or another and keep our inventory in mind. So we retailed far too many cars at a low margin during the quarter compared to what we should normally do. But it leverages our F&I business, it gives us money to the bottom line, and you can see that we have some pretty powerful throughput.
“That’s something that we’re going to work to move up a bit,” he continued. “I’ve learned not to forecast margins because I’m not very good at that. The market dictates a lot of that. So I think we can do a better job there. I wasn’t particularly impressed with our margin result. I was impressed with our volume result.”
For more details on Group 1’s U.S. used-vehicle results reported on Friday, check them out here.
Group 1 Automotive recently released its second quarter financial results, highlighting an 18.2 percent increase in retail used-vehicle unit sales in Q2.
That was an increase of over 4,000 vehicles, bringing the second quarter total to 26,835 used vehicles retailed in the United States.
One of the largest jumps came in used-vehicle retail sales revenue, which increased 20.8 percent year over year to over $572 million, compared to 2014’s Q2 result of roughly $474 million.
Group 1’s gross profit on used-vehicle retail sales was also up by 3.5 percent year over year, coming in at a little over $40 million for the quarter. The average retail sales price for a used vehicle at Group 1 increased by 2.2 percent year over year in the second quarter, averaging at just north of $21,000 per used vehicle.
Earl J. Hesterberg, the group’s president and chief executive officer, commented on the company’s overall results for second quarter.
"We are pleased to report another record-setting quarter," Hesterberg said. "The combination of continued solid top-line growth in the United States and the United Kingdom, combined with improved expense leverage, delivered all-time record adjusted diluted EPS of $1.98. We are particularly pleased with our 14 percent increase in both U.S. and U.K. same store used-vehicle sales and the acceleration of our U.S. parts and service revenue, which was up 8 percent on a same store basis. Finally, although overall market conditions have continued to deteriorate in Brazil, the combination of our brand profile and cost cutting initiatives allowed us to deliver a pre-tax profit in that market this quarter, which is an impressive accomplishment by our Brazilian operating team."
To check out the company’s full financial results for the second quarter, click here.
TrueCar held a preliminary second quarter results conference call last week for investors in light of expected losses. During the call, management made a point to explain it’s important to discuss what is contributing to these predicted losses, but also “what did not happen.”
Scott Painter, TrueCar’s chief executive officer and founder, shared with listeners that the end of the company’s relationship with AutoNation, in particular, did not contribute to difficulties seen in Q2.
“AutoNation stores came off in the third quarter, which did not contribute to the shortfall in the second quarter. The losses against us have not disrupted our dealer relationships,” said Painter.
Earlier this month, AutoNation and TrueCar announced their relationship would be ending as of July 31 due to a dispute about the sharing of customer information.
That said, TrueCar management did provide guidance to investors on the factors that did, in fact, impact Q2 performance, naming lower revenue growth, as well as an increase in spending as the main culprits.
On Thursday evening, Painter said, “Today, we announce our second quarter and full-year results will fall short of our prior guidance, and we are announcing the expected results today because we wanted to get the information out as soon as we had clarity on it, and we also wanted to provide insight and perspective on the quarter.”
Painter provided specific guidance on the following metrics for TrueCar’s Q2 performance before officially announcing the results during a future conference call, scheduled for Aug. 6:
- The company anticipated it will miss prior guidance on unit volume, revenue and adjusted EBITDA
- TrueCar expects Q2 revenue to come be in the range of $65 million to $65.3 million.
- The net loss is expected to be between $15 million and $15.5 million.
- Adjusted EBITDA for the second quarter is expected to be in the range of $200,000 loss to a positive $300,000.
- And units should come in at around 189,000 for Q2.
Mike Guthrie, chief financial officer at TrueCar, explained in more detail the reasons behind the losses, focusing on expected losses in EBITDA, specifically.
“One is revenue growth came in lower than expected, which resulted in lower growth in units during the quarter, and on the expense side, increased marketing spend associated with a number of initiatives within the company also contributed as well as headcount costs, which were related to hiring that we pulled forward to accelerate our mobile and the development of other new products,” Guthrie reported.
He also noted that the company was light on units across all three of its marketing channels by about 9 percent, which caused approximately a $9 million impact on revenue.
“We need to continue to add more partners that can help drive unit growth,” he added.
That said, it wasn’t all bad news for the company.
“Ironically, in despite of the miss in expectations, it’s shaping up to be our best quarter in corporate history in terms of unique visitors, unit volume, total revenue, closing dealer count and other key metrics,” said Painter.
The company expects to grow units by approximately 27 percent year-over-year, and branded channel units are predicted to increase by approximately 46 percent, which Painter pointed out is substantially higher than overall industry sales industry growth in new automobile sales, which grew at about 4 percent.
Painter also assured investors that the second-quarter results will be a “wake-up call” for the company.
“Despite the challenges in the quarter, I think we are all as excited about the company as we have ever been. I think this quarter is an important wake-up call to us, however, as an organization. We clearly need to focus, prioritize better and show a bit more discipline on the cost side of the business,” Painter said.
“What’s important is that we don’t feel like we have a consumer problem, as we are still able to draw customers as attractive rates to effectively grow our business," he continued. "And despite the legal challenges on the dealer front, we do not have a dealer problem as we are at all-time highs in terms of dealer count and in terms of revenue per dealer.”
During the Q&A portion of the call, not surprisingly, the topic of the loss of the biggest dealer group in the country, AutoNation, and the potential future impact on the company came up.
First, investors wanted to know why they were not warned of potential losses in Q2 during the announcement that TrueCar was parting ways with AutoNation earlier this month.
“When AutoNation announced, we felt like we had to address the AutoNation situation. We were not prepared to talk about the guidance in the business in the back half. We were still in the process of getting our arms around that,” Guthrie said.
TrueCar management pointed out that AutoNation constituted just three percent of the company’s revenue in Q2, noting it was a bit more than that last year and has been on the way down quarter-by-quarter.
The AutoNation break represents a loss of 279 stores in the TrueCar network, which Guthrie said it expects to replace by Dec. 31.
“The amount of impact AutoNation has on our guidance is small, if anything. At the absolute extreme end it has a 3 percent impact on Q3 and Q4. And we obviously don’t think it will be that large," Guthrie said.
As used-vehicle retail same-store sales increased 16 percent year-over-year during the second quarter, Lithia Motors reported on Wednesday that gross profit on those retailed used units softened by 7.3 percent.
Nonetheless, Lithia generated adjusted net income of $49.4 million in Q2; the highest quarterly net income in company history and a 40-percent increase over the prior year period.
The dealer group’s adjusted net income came in at $1.86 per diluted share. This figure compares to last year’s second quarter adjusted net income from continuing operations of $35.2 million, or $1.34 per diluted share.
The company also highlighted Q2 total revenue from continuing operations increased $775 million, or 63 percent, to $2.0 billion, up from $1.2 billion for the second quarter of last year.
A few other noteworthy achievement from Lithia’s second quarter included:
— Total same store sales increased 11 percent.
— New-vehicle same-store sales increased 8 percent.
— Service, body and parts same store sales increased 10 percent.
— Same store F&I per unit increased $78 to $1,280.
— Adjusted SG&A expense as a percentage of gross profit was 66.6 percent.
“Our store leaders remain focused on continuing to capture more new vehicle market share, increasing used vehicle unit volume and growing service revenue while providing an exceptional customer experience,” Lithia president and chief executive officer Bryan DeBoer said.
“Within both DCH and Lithia, many opportunities remain to improve store performance and to find accretive acquisitions,” DeBoer continued.
The stores already within the company portfolio turned 24,689 used vehicles in Q2. Thanks to those DCH stores in the fold, that amount represented a 53.5 percent lift from a year earlier as the company delivered 8,603 more used models.
That turn performance helped Lithia to overcome a $200 dip year-over-year in gross profit per retailed used vehicle. That Q2 figure came in at $2,539.
Also of note in the used department, Lithia wholesaled 3.4 percent less vehicles in the second quarter, sending 7,077 units the wholesale market.
Turning over to company metrics through the first six months of 2015, Lithia reported that revenue from continuing operations increased 65 percent to $3.8 billion, up from $2.3 billion at the midpoint of 2014.
Through two quarters, the group’s adjusted net income per diluted share increased 38 percent to $3.26, up from $2.36. Unadjusted net income from continuing operations was $3.47 per diluted share for the first six months of 2015, compared to $2.27 per diluted share for the first six months of 2014.
Lithia senior vice president and chief financial officer Chris Holzshu pointed out the company’s adjusted SG&A as a percentage of gross profit was 66.6 percent in the second quarter, bringing the first half of the year down to 68.8 percent.
“DCH has been able to reduce selling costs more quickly than we anticipated,” Holzshu said. “As we continue to integrate operations, we are targeting consolidated SG&A as a percentage of gross profit in the mid-60s on a full year basis.
“Additionally, same store F&I per unit was $1,280 per unit, an increase of $78 over the prior year and the best result in company history,” he continued. “We still believe opportunity remains to improve this number given continued focus by our store personnel.”
Editor’s note: For more reaction from Lithia executives about their latest quarterly performance, watch for a report in an upcoming edition of Auto Remarketing Today.
AutoNation hosted its second quarterly conference call of the year on Wednesday, outlining its gains in several metrics.
The dealer group’s retail used-vehicle unit sales increased by 9 percent overall in the second quarter, jumping from 52,656 units in Q2 2014 to 57,370 units in Q2 2015.
Judging the same metric for the first half of the year, AutoNation has retailed 115,994 used-vehicle units overall in the first six months of 2015, a 10.7 percent jump from last year’s figure of 104,792.
Overall used-vehicle retail revenue for this year’s Q2 came in at roughly $1.1 billion, a 12.1 percent increase over last year’s second quarter overall result of roughly $989.1 million.
Overall gross profit was also up slightly for used units retailed by AutoNation in the second quarter, up 3 percent year-over-year and coming in at a total of $91.4 million for Q2 2015.
Mike Jackson, AutoNation’s chairman, chief executive officer and president, highlighted other details of the company’s achievements, including its 19th consecutive quarter of double-digit year-over-year growth in earnings per share as well as its continued belief that over 17 million new vehicles will be retailed in the United States this year.
“We are pleased with how the AutoNation brand has been embraced, as well as the continued rollout of AutoNation Express and the progress of all our digital initiatives,” Jackson said. “Over 20 percent of our sales were generated through AutoNation websites for the first half of the year. The first phase of AutoNation Express, where a consumer can identify a vehicle, reserve that vehicle and put a deposit on that vehicle, was completed six months ahead of schedule. AutoNation is committed to providing transparency and delivering a peerless customer experience through initiatives such as AutoNation Express."
For a complete view of AutoNation’s second quarter results, click here.
Jackson addresses TrueCar matter
During the conference call, Jackson also provided his own explanation for why AutoNation and TrueCar went their separate ways, mentioning that TrueCar previously generated 3 percent of the dealer group's leads.
"We were operating under a contract that had acceptable terms," Jackson said. "That contract expired at the end of February, beginning of March. TrueCar had demanded in the new contract that we give them all our customer information. In (the) old contract, we gave TrueCar no customer information. This is an unprecedented demand.
"I don't know what company gives 100 percent of their customer information," Jackson continued. "I think it also, if we said yes, definitely would have created privacy issues that would have been cumbersome for us to implement."
Jackson went on to say that he believes his company's brand is strong enough to push forward without the leads generated by TrueCar.
"We think our brand is strong enough, our digital capabilities are strong enough that we will be fine," Jackson said. "And TrueCar is now in our rearview mirror."
Fueled in part by achieving the milestone of retailing 100 used units per store per month for the quarter on a same store basis as well as making strides with its Echo Park specialty dealerships, Sonic Automotive set a new record for used-vehicle sales during the second quarter.
The dealer group reported on Monday that its Q2 used sales came in at 30,301 units, which represented a year-over-year gain of 6.3 percent.
Sonic also highlighted that its Echo Park stores — which are part of a new used-sales strategy with rooftops near Denver — retailed 881 units in the second quarter. That’s up 221 units, or 33.5 percent, from the prior quarter.
The company also posted two other records. Officials reported record Q2 total gross profit of $355.6 million, up 2.5 percent over the prior year quarter
Sonic also enjoyed all-time record quarterly fixed operations gross profit of $170.2 million, up 6.5 percent over the prior year quarter.
All told, the dealer group reported adjusted net income from continuing operations for the second quarter of $23.4 million, or $0.46 per diluted share. Included in these adjusted amounts are pre-tax expenses of $4.1 million, or $0.05 per diluted share, related to EchoPark operations.
Even with that bottom-line performance, it was the used department that got Sonic brass buzzing, including president Scott Smith.
“I’m proud of our operations team for achieving the lofty goal of retailing 100 pre-owned vehicles per store per month,” Smith said in a company statement made available with its Q2 report.
“We have had quarters in the past when we approached achieving this metric and several months where we surpassed this metric, but it had never been achieved on a quarterly basis,” Smith continued. “Generating this type of retail activity fuels our fixed operations and F&I areas where we are most profitable.”
Smith also touched the achievement in fixed operations.
“We also worked to build our fixed operations business in the quarter,” Smith said. “In addition to the benefits we experienced through the reconditioning work performed to achieve the sale of 100 pre-owned vehicles per store per month, we were able to grow overall same store fixed operations gross profit $13.1 million, or 8.5 percent, compared to the prior-year quarter.
“Fixed operations growth was achieved in our customer pay, warranty and internal categories,” Smith went on to say. “This type of internal growth strategy is central to our One Sonic-One Experience (OSOE) initiative which is intended to grow the top-line revenue categories, generate retail activity, and realize benefits over multiple gross profit streams."
Sonic executive vice president of operations Jeff Dyke used the company’s quarterly press release to give an update on other part of the dealer’s group’s business, insisting that “We had another very busy quarter at Sonic Automotive.”
Dyke continued with, “From a franchise store perspective, we executed our playbook and delivered another solid operating performance allowing our team to leverage this performance while we build on our OSOE strategy and our EchoPark business model.
“I am very excited about our pre-owned volume and the continued focus and execution from our team as they achieved 100 units per store per month for the quarter,” he went on to say. “Our focus on our fixed operations business, and in particular our customer pay business, is beginning to pay off and the result showed in the quarter. Warranty business was also robust.”
Turning back to what Sonic calls OSOE, Dyke indicated that company strategy continues to make progress.
“The associated technology's performance is working very well and as a result, we have decided to move ahead with the rollout of several of its technology applications that will benefit our guests and associates,” Dyke said.
“Our proprietary CRM, desking and appraisal tools will be added to our stores over the next year and a half in the first wave of three planned waves that will ultimately result in the complete rollout of OSOE,” he continued. “We will roll out our F&I and pricing tools as part of the OSOE strategy once we are comfortable with our performance in the Charlotte test market.”
Dyke closed his comments distributed by the company by sharing another update about EchoPark, which “made great strides again this quarter as we ramped up and executed our business plan.
Dyke emphasized, “We are meeting our goals and have started the acquisition of properties for our next market. We plan to begin construction in this next market before the end of this year. We also plan on adding an additional five locations to our Denver market over the next 12 months.
“Our associates have created a culture in the stores, which allows them to offer our customers an easy, transparent shopping experience and, as a result, our guest feedback is overwhelmingly positive,” he went on to say. “We expect our initial neighborhood locations in Denver will become cash flow positive prior to the end of this year and we have developed a next generation neighborhood store that further improves our guest experience and operational efficiency.”
Editor’s note: For more reaction from Sonic executives about their latest quarterly performance, watch for a report in an upcoming edition of Auto Remarketing Today.
Pushed by growing pre-owned demand and a couple of market conditions making it ripe for consumers to go shopping, used-car sales in the first half of 2015 climbed above 18 million units and beat the year-ago pace by 1.3 percent.
That’s according to a recap released Thursday by the National Automobile Dealers Association, which said there were nearly 4.4 million used sales in June. That compares to 4.3 million used sales in the same month of 2014. Through June, there have been close to 18.6 million used sales, against 18.4 million in the first half of 2014.
“Used-car sales have risen this year because of increased consumer demand. More car shoppers are looking to trade-in and trade up their vehicles,” said NADA chief economist Steven Szakaly. “In addition, trade-in values have held up surprisingly well, and there is currently no sign of weakness in either the new- or used-car market.”
NADA’s sales totals includes figures from franchised and independent dealers, as well as those from private-party transactions.
Year-to-date, franchised dealers are showing the most progress, as their used sales have climbed 2.6 percent. Independents are up 1.9 percent, while private-party sales are down 1.0 percent.
In June, however, independents showed the most growth year-over-year (up 3.6 percent), while franchised dealers were up 2.5 percent and private-party sales climbed 1.1 percent.
Industry-wide, used sales for June were up 2.4 percent.
Sales of certified pre-owned vehicles in June surged 17.6 percent higher year-over-year, pushing the industry to another record-setting quarter.
Autodata Corp. reported late on Thursday that June CPO sales came in at 212,957 units. That figure propelled the second-quarter amount to 660,384 vehicles.
The quarterly total represented a 13.5-percent gain year-over-year as well as a 7.4-percent jump compared to the opening quarter of 2015.
Year-to-date, Autodata indicated the industry has turned 1,275,473 CPO vehicles; that’s up 12.5 percent over the midway point of 2014.
Editor’s note: Look for more details about the more recent CPO sales performance coming from Auto Remarketing after the Fourth of July holiday.
AutoNation provided an early glimpse into its second-quarter results on Thursday, revealing that the retailer sold 86,794 new vehicles in Q2, a 7-percent increase compared to last year.
Looking at the month of June, AutoNation saw a 9-percent increase year-over-year with a total of 27,862 new vehicles sold.
On a same-store basis, the group’s new-vehicle retail sales were up 7 percent for the month of June; for the quarter, same-store new-vehicle retail sales grew 4 percent year-over-year.
Here’s a breakdown of the sales numbers by vehicle segment, provided by AutoNation:
Second quarter total 2015 new-vehicle retail unit sales mix:
- 26,826 for domestic, up 8 percent versus second quarter of 2014,
- 41,018 for import, up 1 percent versus second quarter of 2014, and
- 18,950 for premium luxury, up 17 percent versus second quarter of 2014.
June 2015 total new-vehicle retail unit sales mix:
- 8,282 for domestic, up 9 percent versus June 2014,
- 13,110 for import, up 8 percent versus June 2014, and
- 6,470 for premium luxury, up 14 percent versus June 2014.
All-time record certified pre-owned sales were reached for six import brands last month, according to Autodata Corp., which also highlighted nice gains overall for European- and Asian-brand programs in May.
In its latest recap of CPO sales, Autodata said these import brands had best-ever CPO results: Infiniti, Lexus, Mini, Nissan, Porsche and Subaru.
Plus, Autodata said, Volvo sales were at a recent high.
Overall, Asian-brand dealers sold 107,870 CPO units for the month (up 8.3 percent), with year-to-date sales hitting 482,578. That beats the year-ago pace by 6.7 percent.
European brands reported 43,286 certified sales in May, beating May 2014 figures by 11.9 percent. Five-month figures stood at 185,813 units, an 11.6-percent increase.
