Penske Automotive Group Inc.'s second-quarter income fell as weak market conditions in the United Kingdom hurt new-vehicle sales and used-vehicle profits in that market.
Net income for the nation's second-largest dealership group dropped 12 percent to $118.5 million. Revenue dipped 3.1 percent to $5.76 billion, and Penske's gross profit fell 2.5 percent to $867.8 million. In the company's retail automotive unit, revenue and gross profit dropped in both the new- and used-vehicle businesses but rose in service and parts and finance and insurance.
Soft results in the U.K. were partially offset by strong performances in U.S. automotive retail, the North American commercial truck dealership business and Penske Truck Leasing, CEO Roger Penske said in a statement.
Penske Automotive this month acquired Warner Truck Centers, which sells Freightliner and Western Star medium- and heavy-duty commercial trucks at six locations in Utah and Idaho. The acquisition is expected to add $1.1 billion in annual revenue. It expands Penske's Premier Truck Group footprint to 25 dealerships.
In the U.K., new-vehicle registrations declined about 5 percent, including an almost 7 percent drop in private/retail registrations, which hurt Penske's sales there. An oversupply of used vehicles in the U.K. also sapped used-vehicle values in that market, pinching Penske's margins in the region.
"As the U.K. continues to address Brexit we have implemented cost saving initiatives which are expected to help mitigate further weakness in the U.K. market," Penske said in the statement.
In addition to the weak U.K. market, the timing of customer deliveries in Penske's commercial vehicles unit in Australia also affected the company during the quarter, Penske said. Penske Automotive's income from continuing operations attributable to common shareholders fell 13 percent to $117.7 million.
The company said 57.9 percent of its second-quarter revenue came from North America, up 2.5 percentage points; 33.5 percent came from the U.K., down 2 percentage points; and 8.6 percent from other international markets, down half a percentage point.
Sales: New-vehicle retail sales in the company's light-vehicle dealership business dropped 9.7 percent to 55,146, while used-vehicle retail sales slipped 1.5 percent to 72,066. Overall sales fell 5.2 percent to 127,212 vehicles.
Same-store sales: New-vehicle retail sales fell 9 percent to 54,540 vehicles on a same-store basis, while used-vehicle retail sales dipped 0.5 percent to 71,411. Penske doesn't break out its new light-vehicle sales for the U.S. New light-vehicle sales across the U.S. during the second quarter dropped 1.7 percent, 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.
Penske shares fell 3.7 percent to close at $45.12 on Tuesday.