Penske expects boost in luxury car sales from Olympics in U.K.
Dealer group reports 26% gain in Q2 profits on higher retail sales
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DETROIT -- Penske Automotive Group expects to see a boost in luxury vehicle sales this quarter at its U.K. stores on the heels of the 2012 Summer Olympics in London.
But the outlook for Penske’s U.S. business is harder to predict ahead of the presidential election, Penske Chairman Roger Penske said in a second-quarter earnings call today.
Penske Automotive Group reported a 26 percent increase in net income for the second quarter driven by strong retail vehicle sales -- particularly at Toyota and Honda dealerships.
The retail group's second quarter net income was $49.1 million compared to $39.6 million a year earlier, the company said in a statement today.
Penske is the last of the public retailers to report second-quarter earnings. Most of the retail groups reported profits buoyed by increased new vehicle sales and strong finance and insurance sales.
But Penske’s F&I revenue per vehicle fell slightly from the year-ago quarter, to $980 compared to $989.
Roger Penske said the acquisition earlier this year of a dealership group in Belfast, Northern Ireland, lowered the average for the whole group.
On a “same-store” basis, not counting the acquisition, F&I revenue per vehicle was flat to slightly ahead of a year ago, Penske said.
Olympic sales
For the third quarter, Penske sees more opportunities for growth emerging from the summer Olympics in London.
“I was at the Olympics for two days and I saw a lot of BMWs so those will be good used cars for us when the Olympics are over,” he said.
Penske has 170 franchises located outside the United States, mostly in the United Kingdom. BMW put about 4,000 of its vehicles into service as “the car of the Olympics,” Penske said.
“We’ll have an opportunity, as dealers, to buy those, hopefully,” Penske said.
BMW makes up 24 percent of Penske’s brand revenue mix.
Penske Automotive is bullish on the third quarter in the United States. It is holding its 2012 forecast for U.S. vehicles sales at 14 million to 14.5 million units based on continued strong demand for premium luxury vehicles, more available credit and a slowly rebounding market.
But Roger Penske stopped short of predictions beyond that, saying the U.S. presidential election could impact taxes. If taxes change that could hurt demand, especially for luxury vehicles.
“The retail market will be up about 25 percent from the last couple of years,” Penske said. “But I have to take the election and what’s going to happen in Washington into consideration to make any further predictions.”
Strong performance
In today's report, Penske said total revenue increased by 19.2 percent to $3.4 billion. It was driven by a 21 percent increase in total retail unit sales. The increase in retail vehicle sales was highlighted by a 25 percent boost in new vehicle sales and a 16 percent increase in used vehicle sales. Total same-store retail sales increased 12 percent in the second quarter.
"The company's second quarter results reflect strong performance across both the United States and International markets," Roger Penske said in a statement. "We experienced strong unit sales throughout the quarter, particularly through our Toyota, Honda and Lexus dealerships, and we increased our service and parts gross margin by 130 basis points to 59 percent."
Same-store retail revenue increased 9 percent in the second quarter. Gross profit improved
13 percent to $513.4 million and operating income increased 30 percent to $90.3 million, Penske said.
During the quarter, average gross profit per vehicle slipped 6.6 percent to $2,969 for new vehicles and fell 10.6 percent to $1,972 on used.
Penske, based in suburban Detroit, ranks No. 2 on the Automotive News list of the top 125 dealership groups in the United States with 154,829 in new-vehicle sales in 2011.
You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on 
