Sales figures before and after dealerships went public suggest that many fared better under private ownership.
Apparently, only one public dealership group - Lithia Motors Inc. of Medford, Ore. - improved its same-store sales in 1997. Lithia boosted same-store sales 4 percent.
Same-store sales is the year-to-year comparison of revenues for retail outlets a company has owned for at least one year.
'A retailer can pump up sales by opening more stores,' says Pamela Rucker, spokeswoman for the National Retail Federation. 'If you look at the same store from year to year, that is a more accurate barometer of whether the retailer is doing well or not.'
Although some of the public chains attribute the lower sales to soft local car markets, critics contend dealerships are run better when the manager is the owner. The figures show the transition to public ownership can be bumpy.
According to Sheldon Sandler, managing director of corporate finance for investment banker Ladenburg Thalmann Co. in New York, sales figures show how well public companies manage the dealerships they have acquired. An increase in same-store sales shows new owners were able to improve operation.
By the end of 1997, six public chains had owned new-car dealerships for at least a year.
Three of the six saw declines in same-store sales for 1997: Cross-Continent Auto Retailers Inc. of Amarillo, Texas; Smart Choice Automotive Group Inc. of Titusville, Fla.; and United Auto Group Inc. of New York.
CarMax Group of Richmond, Va., and Republic Industries Inc. of Fort Lauderdale, Fla., would not comment on the new-car stores they had operated for a year. Republic said it is too early to report same-store sales because it has owned only one new-car dealership for a year. CarMax said it does not break down results for its new-car stores.
Companies that saw declines primarily blame weak local car markets:
Cross-Continent Auto Retailers said sales at its Amarillo dealerships were off by 12 percent, in line with the market. Sales for Lynn Hickey Dodge in Oklahoma City plummeted 51 percent. The company blames cutbacks in fleet sales and reductions in aggressive promotional discounts. New retail unit sales dropped about 31 percent for the Dodge store, based on company sales data.
Smart Choice Automotive Group said sales dropped 9 percent in 1997 at the Nissan store it owned for a year but improved dramatically in the fourth quarter. New-vehicle unit sales were 67 percent higher than in the final quarter of 1996.
United Auto Group said in its 10-K report that same-store sales declined. It blamed the decrease on inventory shortages at Atlanta Toyota and weak sales in the Atlanta market, plus shutdowns of unprofitable dealerships in its DiFeo division.
But other dealership groups have improved year-to-year sales despite a flat or down market.
Major Automotive Group of Long Island City, N.Y., which will become a public group when acquired by Fidelity Holdings Inc., says it has a different plan. Major doubled sales at a dealership it acquired a year ago. 'I don't think these companies have been able to bring in the synergies that make the stores increase their sales,' says Bruce Bendell, president of the New York-area chain. 'They rushed to put deals together in order to get the numbers.'
Bendell says some chains are too spread out. He also believes some dealers who sold out and stayed do not perform as well as before.
But Republic Industries spokesman Jim Donahue says dealers bought out by Republic are highly motivated. 'The dealer has a significant ownership position in terms of stock in the company, his name is on the front door of the dealership and he is in the store every day,' Donahue said.
David Bright, a United Auto Group spokesman, says, 'United Auto acquires profitable dealership groups with experienced management teams. We are extremely pleased with their commitment to the profit opportunities afforded by our retailing model.'
Joe Herman, COO of Planet Automotive, the Miami chain formerly known as Potamkin Cos., says some public groups would perform better with leaner management and less interference. Says Herman: 'When you put a corporate cookie cutter on some of these individual businesses, you change the things they did to make the business successful.'