Dealer Groups

Penske wraps up CarShop purchase

BLOOMFIELD HILLS, Mich. - 

Penske Automotive Group has sealed the deal on its CarShop acquisition.

The dealer group said in a news release Thursday it has completed its purchase of the U.K. used-car retailer.

Penske expects CarShop to pull in about $340 million in annual revenue, and estimates accretion at $0.07 to $0.09 per share annually.

Penske announced in early January it had signed an agreement to buy CarShop, a chain of five standalone used-car retail stores in the U.K. 

The used-car retailer has locations in Cardiff, Swindon, Northampton, Norwich and Doncaster. The company, which launched in 1999, also has a 15-acre vehicle preparation center in Leighton Buzzard that can recondition 45,000 cars a year.

In a news release, dealer group chairman Roger Penske said, "The acquisition of CarShop complements our existing core auto retail business and furthers our diversification strategy within the transportation services industry.

“The CarShop acquisition along with the acquisition of CarSense in the United States strengthens our position in our core markets and provides scalable future growth opportunities,” he said.

The chief executive of Penske’s U.K. operations, Darren Edwards, said in Thursday’s news release: “We are delighted to welcome the CarShop team to Penske Automotive Group and look forward to the opportunities this will provide to expand and diversify our business in this sector of the market.”

Combined, the two used-car standalone store outfits that Penske Automotive purchased should pull about $700 million in revenue each year, Roger Penske said.

Buying these standalone pre-owned outlets, Penske said in a quarterly conference call this month, gives the dealer group a chance to diversity further and provides “a greater opportunity to drive used-vehicle sales in this growing segment of the market.”

 


Used & F&I results push Lithia to best Q4 income mark ever

MEDFORD, Ore. - 

Lithia Motors produced an 11-percent gain in same-store used-vehicle retail sales during both the fourth quarter and for the full year, according to the dealer group’s recently released financial statement.

The company said it turned 28,715 used vehicles during Q4 and 113,498 used units during the calendar year, which represented year-over-year gains of 19.6 percent and 14.5 percent, respectively.

While Lithia watched its used department retail more vehicles, the dealer group struggled to keep gross profit like many other operations. Lithia said its overall gross on used-vehicle retail sales came in at $2,207 in Q4 and $2,323 for the year. The figures marked year-over-year softening by $160 and $111, respectively.

But also like other publicly traded dealers group generated, Lithia also posted what turned out to be record-setting performance in the F&I office. Lithia’s F&I gross profit climbed by $69 to $1,257 during Q4. For the year, the company’s F&I gross jumped $80 to $1,276.

“We increased same store sales in all core business lines, including double-digit growth in used vehicle sales and record performance in F&I,” Lithia president and chief executive officer Bryan DeBoer said in a news release.

“Our store leaders remain focused on capturing incremental used vehicle sales and driving additional service work,” continued DeBoer, who added that 60 locations attained record profitability in 2016, “while significant opportunities remain in the roughly 90 stores that did not achieve record performance this year.

“We will continue to target gaining market share and controlling costs to improve store performance in 2017 and beyond,” he went on to say.

Fueled in part by what happened with used vehicle and F&I, Lithia also reported the highest fourth-quarter and full-year revenue and earnings per share in company history.

The company’s Q4 net income per diluted share increased 13 percent to $2.03 from $1.80 during the same period in 2015. For all of 2016, the company’s net income per diluted share rose 12 percent to $7.72, up from $6.91.

On the revenue side, Lithia made year-over-year gains of 15.0 percent in Q4 and 10.3 percent by year end, generating $8.68 billion.

As far as expectations for 2017, Lithia’s guidance included used-vehicle same store sales increasing 5.5 percent and gross margin on those turns of 11.5 percent to 11.7 percent. The company also is projecting F&I gross profit of $1,270 to $1,295 per unit.

Group 1 appoints new director to expanded board

HOUSTON - 

Group 1 Automotive announced on Monday it expanded its board of directors to 10 directors following the appointment of Carin Barth, president of LB Capital, a private equity investment firm she co-founded in 1988.

"It is exciting to add Carin to our Board,” Group 1 Automotive chief executive officer Earl Hesterberg said in a news release.

“She has a long history of corporate and civic governance excellence with very large organizations based in our home market of Houston and throughout the state of Texas."

Currently, Bath serves on the board of directors of Enterprise Holdings. She is chair of the Audit Committee at Black Stone Minerals L.P. and also the general partner of Enterprise Product Partners L.P.

At Texas Tech University, the new director is chair of the Investment Advisory Committee, a trustee of the Welch Foundation.

"Carin is a well-respected business and civic leader who will provide additional depth and great financial expertise to our board. She is a terrific addition," Group 1 board of directors chairman John Adams said.

Barth received a Bachelor of Science degree from the University of Alabama and a Master of Business Administration from Vanderbilt University's Owen Graduate School of Management.

Penske: Used-car standalones a big 'opportunity'

CARY, N.C. - 

The two used-car standalone store outfits that Penske Automotive Group recently purchased — CarSense in the U.S., CarShop in the U.K. — should pull about $700 million in revenue each year, says the retailer’s chief executive, Roger Penske.

Buying these standalone pre-owned outlets, Penske said in a quarterly conference call this week, gives the dealer group a chance to diversity further and provides “a greater opportunity to drive used-vehicle sales in this growing segment of the market.”

“Opportunity,” seems to be the key theme when talking about the growing trend of retailers getting involved in the standalone used-car space.

And why not? The used-car market is one that has 40 million unit sales each year, as Penske pointed out in the call.

The acquisition of CarSense also gives Penske Automotive the chance to offer a different pricing option to its used-car customers.

Penske explained in the call that the dealer group’s used-car prices usually run from $26,000 to $28,000, whereas CarSense “probably” hovers in the $19,000 to $21,000 range.

“So we’re really going to access a different customer with a different model: fix price, salaried employees, unit bonuses,” Penske said of CarSense. “Based on our current understanding of that business, it’s really a no-haggle, no-fear buying experience — which we’ve heard about, and now we’re going to experience. And I think the question is, is this going to be an opportunity that we can then take into other markets?

“We think we can. There’s a lot of white space,” he said. “There’s no corporate identity and franchise agreements, so I think the used-car business is a real opportunity for us as we see the OE’s putting pressure on new-car margins.”

During the call, Penske was asked about growth and investment in the standalone used-car model and whether there were any limitations to consider from a bricks-and-mortar growth perspective.

Not only does he see the investment being much lower than a traditional dealership model, Penske plans to open two or more additional CarSense locations this year.

“Our peers have all been getting into this business, and I think that they see the capital expenditures, the investment in bricks and mortar being considerably less than going into the traditional dealership model,” Penske said. “And I think that this bodes well for us. And we look at probably adding at least two locations in 2017 here in the US, and also at least one in the UK, as we go forward.”

Acquisition versus building

Unlike its peers, Penske Automotive jumped into the standalone used-car space by acquisition, rather than building and opening stores. Penske was asked why this route was advantageous versus starting from scratch, so to speak.

“I think that you can take either course. I’m not sure that I’m any smarter than they are, but I would say that in our case, particularly, I see a business from CarSense, which has been perfected over 20 years in that Philadelphia-Pennsylvania-New Jersey market,” Penske said.

“There’s very attractive demographics there. There’s a high repeat business, so we’re getting a repeat-referral already coming out of that business, and we talked about the culture and the hiring process there (being) key,” he said. “And I think that it’s interesting, when we look at this new model, we now have, really, something that we can use to base our future growth because we have a successful model.”

Opportunity in off-lease

Penske reiterated that the used-car retail market is almost three times as large as the retail, non-fleet new-car market. Which, again, brings about a lot of opportunity for the retailer and its public competitors.

So too does the off-lease supply expected to hit the market. The Manheim 2017 Used Car Market Report forecasts 3.6 million off-lease units this year, with 4 million- expected for 2018.

In a press conference at the NADA Convention & Expo, Cox Automotive Inventory Solutions president Janet Barnard said a peak of 4.6 million off-lease units is projected for 2020.

During the call, Penske was asked a question regarding the potential supply opportunity of off-lease volume versus the margin pressure it can cause.

He noted that at the end of a lease, the customer can choose to extend the lease, purchase the car or a third option: the automaker takes the car back, Penske Automotive negotiates with the automaker to acquire the vehicle and then retails it.

That’s where CarSense could come into play, he said.

 “And I think the impact to move those obviously is better today with low interest rates. You certainly have zero-rate financing; you’ve got longer warranties you can put on that if they’re certified; and we have the benefit to move some of these vehicles that are available, we can go in and try to buy blocks of vehicles and CarSense would be a perfect place to put those,”  Penske said. “Remember if they’re 2, 3, or 4-year leases, they’re going to be in that sweet spot around $20,000 retail, which is exactly what we’re looking for, versus loaner cars that are coming out that might be as high as $30,000.”

Asbury’s Q auto

One of Penske Automotive’s peers in the used-car standalone space is Asbury Automotive Group, which also held its quarterly earnings call on Tuesday.

During the call, president and chief executive officer Craig Monaghan said: “We are down to two Q auto stores. The results in the quarter just aren’t material and I don’t think they’re worth talking about. I would say philosophically we believe there still continues to be an opportunity to go to market with alternative distribution channel at Q auto to sell cars that would otherwise go to auction.

“We’ve moved to a quality outlet concept; we're doing that in the Tampa market we think two stores are all we need to cover that market. I would say it’s still an experiment,” Monaghan said. “The definition of success for us is a business model that generates an ROI that's above our cost of capital.

“We’re not there yet; we’re hopeful we can get there. If we can make these two stores work, we’ll roll this concept out to the markets where we’ve got a footprint elsewhere around the country.”

Annual used-car sales: Group 1 up 4%; AutoNation off slightly

HOUSTON and FORT LAUDERDALE, Fla. - 

The first two publicly traded groups to share their 2016 financial statements — AutoNation and Group 1 Automotive — posted mixed results within their used-vehicle departments.

Group 1 reported that its dealerships retailed 129,131 used vehicles last year, representing a 4.0-percent increase above the 2015 figure. The company also generated a 3.3-percent rise in retail used-vehicle gross profit as its revenue in the used-car space climbed 6.7 percent.

For the year on a per unit basis, Group 1 reported retail gross of $1,472 on its used-vehicle turns. That figure softened by 1.7 percent year-over-year.

Meanwhile, the F&I offices at Group 1 stores compiled a $74 increase in gross per unit, ending the year at $1,599.

At AutoNation, the dealer group said it turned 225,713 used vehicles in 2016, which ended up being a figure 1,577 units less than the previous year. And the group’s gross profit per used unit softened by $93 to settle at $1,484 for the year.

But like Group 1, AutoNation made improvement in the F&I office as gross per unit on the back-end of deliveries jumped by $54 year-over-year to finish 2016 at $1,588.

Both Asbury Automotive Group and Penske Automotive Group are scheduled to release their year-end results on Tuesday. Later this month, both Lithia Motors and Sonic Automotive will share their numbers, too, on Feb. 15 and Feb. 21, respectively.

If he joins Asbury’s conference call with the investment community, it likely will be the last time for Keith Style, who recently provided notice of his intention to resign from the position of senior vice president and chief financial officer of the company effective March 7.

“We thank Keith for his valuable service to Asbury over the last 13 years and wish him well in his next endeavor,” Asbury president and chief executive officer Craig Monaghan said in a news release. “We are pleased that Keith has agreed to remain with the company until after we file our annual report on the Form 10-K for the year ended Dec.31, 2016.”

Asbury indicated Style is departing in order to accept the position of president and chief financial officer of a privately owned company.

“I would like to thank Craig for his mentorship during our time working together,” Style said. “I’m very thankful for the opportunities and support both he and the Board provided me during my years at Asbury.  It's been a privilege to work alongside the high-performing members of the Asbury team.

Asbury also announced that William Stax, corporate controller and chief accounting officer of the company, was appointed interim principal financial officer effective March 8 while the dealer group conducts a search for a new chief financial officer.

Larry H. Miller Group acquires 2nd Calif. dealership

CORONA, Calif. - 

Larry H. Miller Dealerships announced it acquired Corona Nissan in Corona, Calif. on Wednesday, which marks the dealership group’s second store in the state.

“We have several Nissan stores in the group that consistently perform well. Strategically, this store is a great fit with our organization,” Larry H. Miller Dealerships president Dean Fitzpatrick said in a news release.

“Our commitment to the community of Corona is even stronger, as is our vision to continue to be the best place in town to work and the best place in town to do business.”

The dealership group renamed the location Larry H. Miller Nissan Corona following the acquisition. Larry H. Miller Nissan Corona is located at 2575 Wardlow Road in Corona.

Larry H. Miller Dealerships said it is dedicated to giving back to the communities where it operates and since 2014 has donated more than $35,000 to the Corona community.

The group operates 60 dealership locations under 20 different automotive brands in seven states.

AutoNation names Berman president

FORT LAUDERDALE, Fla.  - 

Bill Berman has been named president of AutoNation, the retailer said in a news release.

In a move that was effective Wednesday, Berman — who had been executive vice president and chief operating officer — becomes president and COO.

Mike Jackson, who had held the title of president, continues at AutoNation’s chairman and chief executive officer.

Berman has been EVP/COO since 2015, after leading the west coast region for AutoNation.  As region president, Berman built several used-car and Customer Care processes that AutoNation implemented throughout its dealer body. Berman engineers the retailer’s brand extension strategy, implementation and growth.

“Bill is an outstanding and exceptional leader, whose proven track record and ingenuity are vital for the next phase in AutoNation's history,” Jackson said in a news release. “He will continue to lead all operational functions, including the recently announced AutoNation brand extension strategy.”

Addtionally, AutoNation promoted Marc Cannon and Donna Parlapiano to executive vice president positions. Both of those moves were also effective Wednesday.

“Marc and Donna, along with Bill, are key to AutoNation's continued growth and the implementation of our strategic brand extension initiatives. With this expanded executive team, AutoNation is well positioned for a successful future,” Jackson said. 

AutoNation, CarMax on growth in wholesale activities

CARY, N.C. - 

In the dealer group’s third-quarter earnings call, AutoNation chief executive Mike Jackson addressed not only how AutoNation is going to procure inventory to fill its AutoNation USA standalone used-car store locations, the dealer group boss also touched on why the company is delving deeper into the auction business.

First, AutoNation explained how it will find the inventory that will turn at these new stores.

“Obviously, we’re going to need a lot more inventory. And we’ve worked very hard to build a central acquisition team to do that. Then we can supply incremental product both to our existing AutoNation franchise business and the AutoNation USA stores,” Jackson said during the October call.

“It’s the reason we’re building an auction system for what we do acquire in trade. That we have a very good way to balance inventories, and I’m not worried about supply. I think we have that pretty well thought through,” he said.

AutoNation chief operating officer Bill Berman then joined the conversation.

“What I would add is, once again because of our centralized capabilities, we have access to inventories that not everybody else has,” Berman said. “We will be buying from auctions to a limited extent. There’ll definitely be the ‘We’ll buy your car component,’ which is to sit here and attract inventory from consumers that are not looking necessarily to purchase a vehicle. Plus, we have our current source of inventory which comes from trade-ins from our existing stores.

“Plus, with the influx of cars coming off of lease over the next 12 to 18 months, there’ll be additional inventory that’s going to come in at the existing new car franchise. Of course we’ll not be able to handle all of it, and we’ll be able to use that inventory to help supply our USA stores,” he added.

AutoNation owns and operates a successful wholesale auto auction in southern California, which processes more than 25,000 vehicles annually. With an opportunity to leverage its expertise and expand in an attractive growth market, the company plans to open four additional AutoNation-branded auto auctions over the next two years, starting in Orlando, Fla., and Houston during the first half of 2017.

“We’re finding the auction system that we have in California gives us outstanding market information and gives us the highest value for the vehicle that is not appropriate for us to retail, so that auction is very profitable for us,” Jackson said.

“I think building an auction system across the enterprise to run this integrated AutoNation pre-owned one-price system is a key component. And we think, yes, it will be profitable in and of itself,” he went on to say.

Meanwhile, another major player in the space is CarMax. It has sold 4 million wholesale units in its history, and moves over 400,000 wholesale units a year, according to an analyst day presentation the company made available on its website.

“This one is near to me, because this is where I started my CarMax career,” president and chief executive officer Bill Nash said during the January presentation. “When I came here, my job was to run the auction business. And I can remember when we sold 5,000 cars in one year, and we thought it was a big day.

“Today, we’re selling more than 400,000 cars a year. We’re the third-largest auction company in the U.S. when you look at just physical auction locations,” he said. “It’s a huge competitive advantage.”

In its most recently completed fiscal quarter (Q3 of fiscal 2017, which ended Nov. 30), CarMax said it wholesaled 91,973 units. This was down 2.2 percent year-over-year, “as contributions from the growth in our store base and an improved appraisal buy rate were more than offset by a reduction in appraisal traffic,” the company said in a news release.

Year-to-date, CarMax had wholesaled 300,543 units, down 0.6 percent year-over-year. 

Penske closes purchase of standalone used-car retailer

BLOOMFIELD HILLS, Mich. - 

Penske Automotive Group said Wednesday that its purchase of CarSense announced in December has officially closed.

CarSense, a standalone used-car retailer whose no-haggle model focuses on late-model units. It has five stores throughout the Pittsburgh and Philadelphia metro areas, including southern New Jersey.

“We are pleased to welcome the CarSense team to Penske Automotive Group, and we look forward to combining our resources as we expand our share of the highly fragmented used vehicle marketplace,” Penske Automotive Group executive vice president Whit Ramonat said in a news release.    

Penske anticipates an estimated $350 million in annual revenue to be generated from the purchase. It estimates accretion at $0.07 to $0.09 on an annualized basis.

Fellow publicly traded dealer groups Sonic Automotive and Asbury Automotive Group each have used-car standalones in EchoPark Automotive and Q auto, respectively, while AutoNation has plans to roll out its own.

Similar purchase in UK

In a related move, Penske announced Friday that it has signed an agreement to buy CarShop, a chain of five standalone used-car retail stores in the U.K.

CarShop has locations in Cardiff, Swindon, Northampton, Norwich and Doncaster. The company, which launched in 1999, also has a 15-acre vehicle preparation center in Leighton Buzzard that can recondition 45,000 cars a year.

Penske Automotive Group chairman Roger Penske said in Friday’s news release: “The acquisition of CarShop furthers our diversification strategy within the transportation services industry, and is complementary to our existing core auto retail business.

“Similar to the U.S. market, used-vehicle sales in the U.K. are nearly three times the size of new-vehicle sales on an annual basis. The CarShop acquisition, combined with the pending acquisition of CarSense in the United States, strengthens our market position in our two largest markets (United States and United Kingdom) while providing scalable future growth opportunities,” Penske added.

The deal must meet certain conditions and is expected to close by end of quarter. 

Sheehy Auto Stores gives over $160,000 to 23 charities

FAIRFAX, Va. - 

As part of its annual giving program, Sheehy Auto Stores announced on Wednesday that it donated $161,000 to 23 charities in Washington, D.C., Baltimore and Richmond, Va.

Each of the company’s dealerships partnered with various non-profit organizations located in the communities they serve.

"Our employees and family of dealerships do much throughout the year in donating time and money for a variety of charities," said Sheehy Auto Stores president Vince Sheehy in a press release.  "We are grateful for our success and pleased to continue our annual end of the year giving campaign that supports a wide array of causes throughout the Maryland, DC and Virginia areas."

A total of $79,000 went to the Washington, D.C. area, $47,000 to Baltimore and $35,000 to Richmond.

Washington, D.C. area

  • Bethany House ($6,000)
  • Center for Children ($5,000)
  • Covenant House Washington ($6,000)
  • Ecumenical Community Helping Others ($5,000)
  • Fauquier F.I.S.H. ($6,000)
  • The First Tree of Howard County ($8,000)
  • Good Shepherd Catholic Church ($5,000)
  • The Good Shepherd Housing ($8,000)
  • Hospice of Charles County ($5,000)
  • The Lamb Center ($5,000)
  • Ronald McDonald House Charities ($5,000)
  • SERVE ($10,000)
  • Smashing Walnuts Foundation ($5,000)

Baltimore

  • Anne Arundel Medical Center ($30,000)
  • Anne Arundel County CASA ($7,000)
  • Arundel House of Hope ($5,000)
  • Mosaic Community Services ($5,000)

Richmond, Va.

  • Comfort Zone Camp ($2,500)
  • Mercy Mall of Virginia ($19,000)
  • Patrick Henry YMCA ($3,000)
  • ACES ($2500)
  • Young Life Hanover ($3,000 )
  • Habitat for Humanity ($5,000)
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