Penske Automotive Group Inc.'s first-quarter earnings dropped on weaker new-vehicle sales tied partly to vehicle availability shortages in Europe.
Net income for the nation's second-largest dealership group fell 8 percent to $99.2 million. Penske, in a statement Thursday, said revenue fell 3.2 percent to $5.56 billion driven by lower new-vehicle, used-vehicle and finance-and-insurance revenue. The dip came despite revenue gains from service and parts, fleet and wholesale, a $9.8 million income boost from Penske Truck Leasing and record results from Penske's commercial truck operations.
“I am pleased with our first quarter performance and optimistic about the remainder of the year," CEO Roger Penske said in a statement. He highlighted the retailer’s “5.6 percent increase in same-store service and parts revenue when excluding the impact of foreign exchange and the increase in our used to new ratio."
Penske’s income from continuing operations declined 7.3 percent to $100.1 million and was lowered by $7.6 million after taxes related to restructuring charges tied to selling two stores in the U.S. and closing and/or selling four stores in Germany and the vehicle shortages. The shortages stem from production delays connected with Europe’s new Worldwide Harmonized Light Vehicle Test Procedure.
“The WLTP from the Volkswagen brands had a significant impact to us in Q1,” Penske told Automotive News, adding he expects the situation to improve in the second and third quarters this year.
Penske said 24 percent of its revenue comes from Volkswagen Group brands. It has 19 Porsche stores globally and sales of high-margin Porsche vehicles were down by 450 units in the first quarter, he said.
The $7.6 million impact was partially offset by $2.4 million after taxes from a favorable litigation outcome at Penske Truck Leasing. Unfavorable foreign exchange also hurt earnings.
Penske's standalone used-vehicle supercenters' business in the U.S. and the United Kingdom also saw a 3.4 percent decline in sales during the first three months of 2019 to 18,040 vehicles. Revenue fell 5 percent to $314.4 million. Penske plans to open four used-vehicle supercenters this year — two on the East Coast in the U.S. and two in the United Kingdom.
Penske shares rose 0.2 percent to close at $46.17 on Thursday in New York.
Penske said 54.9 percent of its revenue came from North America, up by 1.9 percentage points; 36.7 percent came from the U.K., down 1.5 percentage points; and 8.4 percent from other international markets, down just under half a percentage point.
Sales: New-vehicle retail sales dropped 8.3 percent to 54,370, while used-vehicle retail sales slipped 0.7 percent to 72,744. Overall sales fell 4.1 percent to 127,114.
Same-store sales: New-vehicle retail sales fell 8.5 percent to 53,112, while used-vehicle retail sales increased 0.1 percent to 71,613. Penske doesn't break out its new light-vehicle sales for the U.S. Across the industry, new light-vehicle sales in the U.S. fell 3.2 percent during the first quarter, according to the Automotive News Data Center.
Penske, of Bloomfield Hills, Mich., ranks No. 2 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 236,000 new vehicles in 2018.