A handful of U.S. markets still have too many Porsche dealerships, Porsche Cars North America COO Joe Lawrence said, and the company may use its right of first refusal to close stores.
"There's just a few markets where we feel like we may still be a little bit overdealered," Lawrence said.
But given Porsche's sales growth and the valuations of its dealerships, consolidation in those markets will be difficult unless the stores are put up for sale.
"Blue sky is very high right now. Everybody is obviously very happy to be a Porsche dealer," Lawrence said. Still, consolidation can "happen naturally through buy-sells, and that's honestly probably the way it's going to have to happen at this point."
When asked if that meant Porsche would exercise its right of first refusal on a buy-sell deal in a market targeted for consolidation and then close the dealership being sold, Lawrence said, "That's always an option."
Automakers typically have a right of first refusal clause in their franchise agreements that gives them the right to reject the original buyer on a dealership transaction and reassign the sale, with no changes to the terms. The manufacturer can buy the dealership itself and close the point or tap a dealer of its choosing to be the buyer.
Valuations for Porsche stores are among the highest in the industry with dealership buy-sell advisers such as Haig Partners and Kerrigan Advisors estimating a typical blue sky multiple range of six or seven times earnings. Blue sky is the intangible value of a dealership above and beyond its hard assets, expressed as a multiple of adjusted pretax earnings.
Over time, Porsche would like to see "five, six, seven" consolidations, Lawrence said. But those closings likely would be balanced by "five, six, seven" additional stores through 2018 in high-growth markets, "particularly in the Sun Belt," he said.
Porsche has 189 U.S. dealerships. Executives have said they want to stay around that number. Porsche reduced its dealership count from more than 200 about six years ago, and Lawrence doesn't foresee the total returning to that level.
Porsche has "basically achieved" its goal to dramatically increase average annual sales per store to 250 vehicles by 2018, Lawrence said. That goal was part of Porsche's strategy to increase U.S. sales to 50,000 vehicles no later than 2018, Lawrence said. In 2014, Porsche's U.S. sales rose 11 percent to 47,007 vehicles or an average of nearly 249 new Porsches per dealership.