Used-car performance for the second quarter of 2019 over the same period last year was up slightly for public dealership groups Penske Automotive, Asbury Automotive and Group 1 Automotive, according to each group’s second-quarter financial filings, press releases and Q2 presentations to investors.
• Penske reported that same-store used vehicle retail revenue (U.S. operations) was up 1.2% with same-store used gross profit per unit at $1,445, down $101. F&I was $1,336 per unit, up $119, and service and parts revenue up 3.1%.
• Asbury reported that same-store (U.S) used-vehicle retail increased 1%, and gross profit decreased by 1%. It said F&I revenue and gross profit increased 7%, with parts and service revenue rising 8%, and gross profit increasing 6%.
• Group 1 noted same-store (U.S.) used-vehicle gross profit increased 5.6% or $63, to $1,197, reflecting the impact of its used-vehicle initiatives, launched last year. Used unit same-store sales increased 7% and 11% from the company’s Val-u-Line operations it started last year. Same-store F&I gross profit per retail unit increased $161, or 9.7 percent per unit, to $1,821, service and parts revenue was up 10.1%. Same-store total gross profit grew by 8.5%.
These groups expect to reap improving marketing efficiencies through new digital technologies and applications to lower their costs of sale. The hope that evolving automobile technologies will boost franchise service revenues and retain service customers longer.
Details on Penske results
Penske Automotive reported a 4.4% downgrade in same-store retail unit sales over the same period last year, with new-car and used-unit sales down, respectively, 9.0% and 0.5%. Same-store retail revenue for new cars was down 6.2% and up 1.2% for used cars.
Same-store (U.S.) used-vehicle sales were flat with last year, said Roger Penske, the group’s chairman, chief executive officer and director, during the company’s earnings call.
“Although same-store total unit sales were down in the U.S., ‘variable gross profit per unit’ increased nearly 4% to $125 per unit during the quarter,” Penske said.
The company also operates five Used Car Supercenters in the U.S. Variable gross profit at these one-price, no-haggle stores were flat at $3,036 per unit.
Penske outlined several recent and new digital initiatives improving Penske stores’ performance, including its online sales resources, which feature nearly 60,000 vehicles online ready to purchase.
“In the second quarter, 33% of our new- and used-unit sales in the U.S. were from digital sources, and we continue to reduce our reliance on third-party leads,” Penske said.
Penske said stores’ service departments are responding well to online service appointment scheduling, and online payments continue to perform well for the stores. He noted that during the second quarter, stores’ business development centers and online inquiries generated 400,000 service appointments.
“Every service customer in the U.S. is sent an invitation to pay online,” Penske said, “and as a result, our online payments increased in the quarter by 68%.”
The company is also piloting digital retailing tools to improve collision services customer satisfaction by enabling digital estimating. This new tool allows service departments to update customers on collision repair progress via transmitted work-related images and video. The device also should help increase upsells, Penske believes. It also sees growth from consumers using its online purchasing tool, Preferred Purchase.
Asbury on quarterly performance
David Hult, Asbury Automotive president and CEO, presented an upbeat tone in the company’s written second quarter 2019 operational summary. “In a lower SAAR environment, we grew revenue 5%, delivered 10% parts and service revenue growth, improved our SG&A (Selling, General & Administrative Expense) as a percentage of gross profit 60 basis points, and grew adjusted EPS (earnings per share).
“While we experienced new vehicle margin pressure, we were able to grow our total frontend yield by over $50 per vehicle,” Hult said.
For same-store performance, Asbury reported for the quarter, a 2% increase in total revenue and 4% increase in gross profit, with used-vehicle retail revenue up 1%, through gross profit dipped by 1%. Asbury documents noted too that same-store F&I revenue and gross profit increased 7%, while parts and service revenue grew by 8% in the quarter, with gross profit increasing 6%.
Digital enhancements are playing a role in improving results for Asbury.
“We are making good progress executing on our vision to be the most guest-centric company in the automotive industry,” Hult said during the company’s second-quarter 2019 earnings call. “Our omnichannel approach is multidimensional and encompasses all aspects of the business.”
This progression has included, he said, the creation of an in-house digital marketing team in late 2015, resulting in improved social and mobile marketing and marketing spend. Push Start, the company’s online retailing tool, along with preferred financing alternatives and an online service-transaction solution, were all initiated in 2017. In 2018, Asbury launched its digital collision estimator.
“We dedicated a store to become our pilot dealership of the future where we are testing alternative technologies and processes to optimize the model for the future,’ Hult said. “We expect [these tools] to enhance both transparency and the guest experience while at the same time reducing the number of inbound (service-related) status calls.”
John Hartman, Asbury’s senior vice president of operations, added additional detail.
“Our Push Start online sales are up 29% from the prior year and represent approximately 9% of our total retail unit sales,” he said. “We believe that this is partly attributable to new functionality that we have added to Push Start. The growth resulted too from the online loan marketplace that David (Hult) described earlier that gives customers the ability to scan driver’s license registration insurance documents and the ability to upload trade and photos for an appraisal.
“We are excited about the continued development of our omnichannel-driven growth strategy that allows us to leverage our brick and mortar assets to be the most guest-centric automotive retailer in the industry,” Hartman said. He attributed omnichannel success as well to staff investments, including, since Jan. 1, new compensation and benefit plans, a 40-hour workweek, extended vacation time and paid maternity leave.
“The early indications are that our enhanced benefits packages are having a favorable impact on both recruiting and retention,” Hartman said.
Group 1 talks Q2 results
Group 1, same-store used vehicle retail units increased 7%, with a 17% decrease in wholesale units, according to the group’s used vehicle overview. It said the company’s shift from wholesale to retail channels drove a 12% increase in same-store total used gross profit. Overall, its used-car Val-u-Line operations are showing for second quarter an 11% increase in retail unit sales, compared to a 5% historical average, from the prior year.
“We are very pleased with our U.S. performance as the numerous initiatives we have implemented across our used-vehicle and service departments continue to gain traction and deliver strong same-store growth,” said Daryl Kenningham, Group 1’s president of U.S. operations.
“We are particularly pleased with the increased level of hiring and retention of service technicians and advisors, with same-store headcount for both positions increasing by double-digit percentage points compared to the prior-year period,” Kenningham said.
Earl Hesterberg, Group 1 president and CEO, noted, in the company’s earnings report press release, how well the company performed in the U.S. “despite a soft new-vehicle market.
“Record same-store parts and service revenue growth of more than 10% and record F&I per retail unit profitably drove same-store gross profit growth of 8.5%,” he said.
According to Group 1, the company implemented a four-day, flexible work schedule across its 65 U.S. stores, with another 10 dealerships to be included by next quarter. Implemented also to address turnover, customer satisfaction, and to add capacity via extended hours, Group 1:
• Increased the fixed component of adviser pay
• Created a well-defined career path for advancement
• Implemented an in-house Service Advisor University to trained advisors
• Deployed an in-house Service Manager University
Group 1 also cited online retailing strategies for driving performance. Group 1’s second quarter overview noted that both Internet leads and organic traffic for yielding positive results and that 26% of all U.S. service appointments are now scheduled online.