Penske posts record continuing-operations income in Q1
Penske Automotive Group Inc. reported the highest quarterly income from continuing operations in the company’s history.
The company credited its broad brand mix and market diversity for the increase. Both factors helped offset some losses in sales and service when severe winter weather forced some Penske stores to shut down temporarily.
“We had 280 days of closures on our dealerships in the Northeast and that had a sizable impact on us. But the geographic diversity we have in the West and our international presence, both helped,” Chairman Roger Penske said in an interview with Automotive News.
“Our used car business was strong, sales of new units were up and we were driven quite a bit by the strength of the international business,” Penske added.
Penske’s international business comprises 42 percent of the company’s revenue.
Penske said first-quarter income from continuing operations rose 15 percent to $66.1 million. Revenue rose 21 percent to $4 billion.
Accounting for a gain from discontinued operations, net income rose 17 percent to $67.9 million.
The revenue increase was driven by a double-digit increase in total retail unit sales, including a 10 percent increase on a same-store basis. Gross profit improved 19 percent to $624 million. Penske’s operating income increased 14 percent to $119.7 million.
Total retail vehicle sales increased 13 percent to 95,658 in the quarter. New unit retail sales rose 12 percent. By comparison, overall sales of new vehicles in the United States rose 1 percent in the first quarter.
Total used-vehicle unit sales rose 15 percent.
“We were very excited about the finish of March,” Penske said. “There’s some pent up demand we’ll see in April. I don’t want to forecast that but it’s got to be positive over last year for sure and that’s got to drive the quarter.”
Penske said international vehicle sales also appear to be robust for the second quarter.
Penske said it is looking to hire more salespeople at each of its 243 dealerships as the market moves toward a 16 million annual sales rate. And given BMW’s push for dealers to add “product geniuses,” Penske said it will be “looking out for a different kind of person” than one with traditional sales experience.
In service, Penske’s service bays have capacity for more work, but not enough mechanics to do it, Penske said.
“The issue is trying to attract mechanics who want to make it a career,” Penske said.
Penske’s average gross profit per new vehicle in the first quarter improved by $150 to $3,116. On used vehicles, it declined $39 to $1,918.
Finance and insurance gross profit per vehicle increased $82 in the quarter to $1,097.
Penske’s total liquidity at the end of the quarter was $411 million.
Penske ranks No. 2 on the Automotive News list of the top 125 dealership groups in the United States, with retail sales of 199,795 new vehicles in 2013.
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