Publicly traded dealership groups gained traction in the second quarter for their argument that they can withstand a downturn in new-vehicle sales better than the Detroit 3 can. But the present sales slump has not left the public groups unscathed.
Among the top five U.S. public retailers, Penske Automotive Group Inc. came closest to matching year-ago profits. The suburban Detroit company reported second-quarter net income of $39.9 million, down 1.2 percent.
PAGs business model performed well, Chairman Roger Penske said this week. He cited the groups diversity in revenues, including used vehicles, parts and service, and finance and insurance; geographic diversity, with 37 percent of revenues coming from overseas operations; and a brand mix that is nearly all premium and import.
Penske said his group got only 5 percent of its revenues in the second quarter from Detroit 3 franchises, down from 8 percent in the year-ago quarter. The company ranks No. 2 on this years Automotive News list of the 125 largest dealership groups.
In the second quarter of 2008, combined net income of the top five public groups fell 30.8 percent from the year-ago quarter, to $130.6 million. Revenues fell 6.4 percent, to $12.1 billion.
For the first half of 2008, the groups net income fell 19.6 percent from the first six months of 2007, to $256.3 million. Revenues were down 4.3 percent, to $24 billion.
Even though quarterly earnings were down, they were better than expected for No. 3 Sonic Automotive Inc., of Charlotte, N.C., and for No. 4 Group 1 Automotive Inc., of Houston. After earnings announcements on Tuesday, July 29, both retailers shares rebounded from recent lows.
Sonic CFO David Cosper said depressed values for used trucks hurt the companys used-vehicle earnings.
Truck and SUV prices plunged, Cosper said in an earnings call. We gave up some margin to move those vehicles. We feel this was prudent.
Florida was soft
The fifth-largest public group, Asbury Automotive Group, of New York, said this week that its second-quarter net income was $10.9 million, down from $20.6 million in the year-ago quarter. Revenue fell 11 percent, to $1.32 billion. CEO Charles Oglesby cited soft retail sales in our key Florida markets.
The top U.S. dealership group, AutoNation Inc., of Fort Lauderdale, Fla., reported a 32.9 percent drop in second-quarter net income to $51.8 million. Still, the company was profitable in the quarter.
AutoNation CEO Mike Jackson said the chain will cut $100 million in expenses for advertising, overhead and personnel.
The last of the six public new-vehicle retailers, Lithia Motors Inc., of Medford, Ore., is scheduled to report its second-quarter earnings next week.