Sales Reports

An Interesting Fuel-Price Impact for 1 Dealer Group

MEDFORD, Ore. - 

It may sound like a broken record that the discussion of automotive technicians has once again surfaced in one of the largest auto group’s quarterly conference calls.

But Lithia Motors president and chief executive officer Bryan DeBoer touched on another interesting angle regarding how fuel prices affect the automotive industry — the service side.

When asked how the lowering fuel prices affected Lithia’s sales in fuel-producing states, DeBoer said his company is seeing a bit of a “yin-and-yang benefit."

“In Q4, I think what we really saw was a mix shift from new vehicles to used vehicles. The oil states performed slightly lower than the rest of our states in Q4,” DeBoer said. “If you want a little more color of what’s happening in January — Alaska was up 28 percent year over year in total revenues. North Dakota, which is highly based energy state, even though we’re (selling) in the eastern part of the state, was up 4 percent. And Texas was up about 3 (percent), which is a little bit behind. It still seems strong, though, we’re still pleased.

“It’s a robust economy, there’s no question about it. And if there’s one thing we could say is an opportunity (it's that) some of those pump jacks are now not running, which means that those technicians that aren’t fixing the broken ones are coming back into our company and can now fix the cars that are now in service,” DeBoer continued, “which we all know the throughput in service in cars is a much higher rate than what it is in new vehicles and used-vehicles sales.”

Lithia experienced a 12-percent growth in service, body and parts sales on a same-store basis in Q4 of 2014, which DeBoer said was by no means an unexpected jump and should be expected to increase further in the future. When asked what prompted the strong growth in service sales, DeBoer pointed to an increase in customers simply choosing to come back to Lithia for work on vehicles they had purchased from the company.

“It’s primarily driven solely off of units in operation,” DeBoer said. “Despite us being up 12 percent in aggregate in fixed operations — yeah, it’s (sales) driven off warranty, and it’s driven off customer pay — primarily still we have probably half of our stores that are considerably below that 12-percent level (in service sale growth) and that haven’t reinvented themselves to be able to attract our consumers back to our stores and be able to meet their needs when it comes to a cost proposition or a time proposition.

“To us, 12 percent is just keeping pace with the units in operation growth,” DeBoer later continued. 

For DeBoer, he thinks his company can still do better when it comes to convincing customers to bring their vehicles back for service.

“We believe that there’s still a lot of opportunity out there within our existing Lithia stores," he concluded.

Sonic Provides Update on EchoPark

CHARLOTTE, N.C.  - 

EchoPark Automotive — whose parent company’s president said “is not your mom-n-pop used-car store” — is showing some positive signs on the sales front in its few first months and has plans to roll out in a second market next year following its debut in the Denver area in November.

During Sonic Automotive’s recent quarterly conference call, company president and chief strategic officer Scott Smith provided an overview of the progress made by the retailer’s standalone pre-owned store program.

“Roughly eight years ago, when we began thinking about EchoPark, we wanted to build something that was totally unique in the industry and that could eventually dove-tail with our new-car franchised dealerships,” Smith said. “I cannot overemphasize enough that this is not your mom-n-pop used-car store.

“We have invested in and built what will become a substantial national brand that is predictable, repeatable and sustainable,” he continued. “We did extensive market research to learn exactly what the pain points are in the automotive purchase experience and we set out to eliminate them — all of them.”

Smith went on to note that EchoPark employs a “customer-centric model” that puts the customer in control as opposed to the dealer. The company’s EchoPark team, he said, is also compensated much differently than a salesperson at a traditional store.

Following the EchoPark hub location in Thornton, Colo., launching Nov. 3, Sonic rolled out two neighborhood locations in the Denver area in January and plans to debut at least two more in that area this year.

“We are currently searching for real estate to begin planning for opening a second market for EchoPark in 2016,” Smith said. “We have experienced delays in opening our other locations, which is predominantly due to weather.

“Preliminary sales results are exceeding our internal projections, and we have not yet begun our media placement that will begin later this quarter and into next quarter,” he added.

Specifically, the presentation slides accompanying the company’s earnings results indicates that the EchoPark hub location, for instance, was at 150 unit volume in January, following unit volume of 126 in December and 82 in November.

Among other positive observations about EchoPark cited in the company’s presentation were positive experience, high reconditioning levels, F&I performances beating projections (even without an F&I office) and a strong appraisal process, just to name a few.

The company did note a few opportunities to improve EchoPark, including its website performance, SEO/SEM performance, weather delaying openings of two locations and a delayed (until Sunday) completion of its pricing system.

Lithia’s Used Sales Up 16 Percent

MEDFORD, Ore. - 

Lithia Motors hosted its quarterly conference call on Wednesday to outline its end-of-year results for 2014. The overall highlights were led by the highest fourth-quarter and full-year adjusted net income in Lithia history as well as a 75-percent increase in fourth-quarter revenue from continuing operations compared to 2013.

In the used market, the upward trend was further reflected by a 15.7-percent year-over-year increase in used vehicle retail same-store sales revenue in the fourth quarter, totaling roughly $293 million.

Same-store used-vehicle retail units sold in the quarter were up 9.7 percent, an increase of 1,339 units up to a total of 15,146.

Although the unit sales were up for the quarter, the average gross profit per same-store retail used unit sold dropped $128, a 5-percent decrease compared to Q4 2013. According to Bryan DeBoer, the company’s president and chief executive officer, he is not worried by this and sees the overall result of moving more units as the ultimate opportunity to bring business back to Lithia in the future.

On a same-store basis, the company sold an average of 56 used vehicles per store per month last quarter, an increase of 3 units per month year-over-year and an increase of 8 units per month compared to Q4 2012.

“We believe the increased availability of used cars presents a continued opportunity for our stores to increase unit sales in the future,” DeBoer said. “This remains a top priority for our personnel in 2015 and beyond.”

DeBoer said during Lithia’s press conference that his goal is to reach 75 used units per month in each of the company’s locations.

Discussing more results (all, again, same-store), Lithia’s F&I per vehicle was $1,214 last quarter, an increase of $46 per vehicle year-over-year.

According to DeBoer, his company arranged financing on 72 percent of all sales, sold a service contract for 43 percent and sold lifetime oil products for 35 percent. The company’s service, body and parts revenue increased a record 12 percent over Q4 2013, on top of that year’s 8-percent increase over the fourth quarter of 2012.

“Providing affordable and convenient experiences with each customer, driven by service department personnel who listen and respond rapidly, remains the key to our success going forward,” DeBoer added.

Sonic Hits Used-Car Records

CHARLOTTE, N.C. - 

Among the handfuls of records that Sonic Automotive reported in its fourth-quarter and full-year 2014 results on Tuesday were a few all-time highs in its used-car department.

Starting with the fourth quarter, Sonic reported record Q4 used-car unit sales of 26,406 units as well as record Q4 pre-owned gross profits of $37.8 million.

Sonic posted record annual pre-owned retail unit sales of 110,113. It also posted an all-time high record pre-owned gross profit of $157.2 million.

Sharing some overall commentary, Jeff Dyke, Sonic’s executive vice president of operations, stated:  “I could not be more pleased with our team's performance in the fourth quarter and for the year.  We started 2014 with a huge calendar including launching both EchoPark and One Sonic-One Experience all in the fourth quarter of 2014. 

“The amount of preparation and effort that went into launching these critical programs was second to none and I want to personally thank everyone for the hard work and dedication it took to successfully bring both projects to life,” he continued. “We look forward to sharing our progress as the projects gain momentum.   Despite the time and energy dedicated to the EchoPark and One Sonic-One Experience initiatives, our operations team was able to turn in a record-breaking quarter and year. 

“December was the biggest gross and profit month in our company's history for any year or store count,” Dyke added. “We expect 2015 to be another great year as our team works diligently to deliver on our goals with EchoPark and One Sonic-One Experience.” 

Used Luxury Prices Take Biggest Hit in January

CHICAGO - 

January was a great month for some models and not so great for others according to a Cars.com report on used-vehicle pricing increases and decreases.

The model with the largest percentage change for the month — based on Cars.com data on used-vehicle listings with model years ranging from 2012 through 2014 — was the Chevrolet Express 1500, a full-size van, which saw a 4.8-percent pricing increase between the first and the end of January. Another Express variant, the 2500 model, also made it into the top-10 with a 2.9-percent increase in price, according to the authored by Mike Hanley. 

The model with the biggest monetary price increase, the Porsche Panamera, saw a $1,687 price upsurge last month, a 2.1-percent jump.

On the other end of the spectrum, many luxury cars, along with a few small passenger cars, took big hits this past month. Most notably among them is the Mercedes-Benz S-Class, which saw a 4.2-percent price drop in January, a decrease of $2,757.

Mercedess full-size luxury car was followed in the top-10 biggest drop list by three more German vehicles, all BMWs, including two 5-series vehicles, the 535i and the 528i, along with the Bavarian halo roadster, the Z4, all experiencing price drops roughly around 4 percent.

Full results of the Cars.com report can be found . 

10% Used-Sales Lift for Group 1

HOUSTON - 

Group 1 Automotive retailed nearly 94,000 used vehicles in the U.S. last year, beating 2013 figures by close to 10 percent.

And while per unit figures and gross margin percentages on the used retail side were down, the company increased its used retail gross profits by more than 5 percent.

Reporting fourth quarter and full-year 2014 results Thursday, Group 1 had 93,813 retail used-vehicle sales in the U.S. last year, compared to 85,365 in 2013.

Gross margin percentage on used retail sales for the year was 7.8 percent, down from 8.2 percent.

Group 1 pulled in $149.94 million in gross profits in its domestic used retail operation, which was up 5.6 percent year-over-year. Gross profit per used retail unit sold was $1,598, down from $1,664 in 2013.

Looking at Q4 used results for the U.S., Group 1 sold 23,446 used retail units for a 16.6-percent year-over-year increase.

Gross margin percentage on these was 7.3 percent, up from 7.2 percent in the same quarter of 2013.

Gross profits on used retail sales was $35.33 million, compared to $30.16 million a year earlier. Per unit, gross profit on used retail sales was $1,507 in Q4, up 0.5 percent year-over-year.

Sharing some commentary on the entire spectrum of the company’s overall results (including U.S. and international operations), Group 1 president and chief executive officer Earl Hesterberg said in the earnings release: “We are delighted to announce all-time record adjusted earnings for this quarter and the full year. For the quarter, the results reflect double-digit revenue growth, improved margins, and impressive cost control.

“Each of our geographic markets delivered significant improvements, with continued strong growth in the U.S. and U.K. and the benefits of cost reductions in Brazil driving higher earnings in all three countries,” Hesterberg added. “For the full year, revenue increased more than $1 billion, which in combination with improvements in our cost and capital structure, translated into record adjusted full year earnings of $5.87.”

Asbury: Framework is There, Just Need Technicians

DULUTH, Ga. - 

Just after the second quarter of 2014, AuSM reported that a couple of the nation’s largest auto groups were having some challenges acquiring the skilled labor they needed to help fuel the automotive market’s current renaissance.

Half a year later, it appears as though this will continue to be an ongoing hurdle for the car business, including companies like Asbury Automotive Group, which shared its latest quarterly and full-year earnings results this week.

Craig Monaghan, the company’s president and chief executive officer, touched on the subject of skilled labor during Asbury’s quarterly conference call on Wednesday.

“We as an industry could use more technicians and (at) Asbury we feel that pressure, as well,” Monaghan said. “The constraints in our stores are not bays or stalls or lifts; the constraints are technicians.”

While many dealer groups do their best to attract and retain highly skilled laborers to fill their recall-fueled service departments, there is still an incredible shortage. The next best step is to source talent from local institutions and to invest in training for current employees.

“We’ve got a number of programs in place to help us meet the demands in our stores,” Monaghan said. “We work with a lot of local community colleges. A lot of students will go to school and also work part time in our stores. We’ve recently initiated our own technical institute, if you would, where we’re training employees in a standalone training center that we’ve put together. So I would say it’s an ongoing challenge, but it’s something that we’ve been able to manage our way through, and I think we’ll continue to manage through it in the future.”

In other Asbury news, similar to AutoNation’s response earlier this week, the company’s executive vice president and chief operating officer, David Hult, says pricing in the used market appears stable for the time being.

“We don’t see any issue with our pricing right now, we see it maintaining.” Hult said. “I can’t speak for how the year’s going to go but current market conditions and what we saw in the fourth quarter, prices remain strong in all markets. There was a little bit of movement in ’14 in the compact segment but the rest of the segments remain strong.”

Asbury’s Q4 Used Revenue Rises 12%

DULUTH, Ga. - 

Asbury Automotive Group announced its fourth quarter results on Wednesday, joining the list of automotive groups that reported record quarterly and yearly share earnings to round out 2014.

On the used-vehicle front, Asbury’s used-vehicle retail revenue rose roughly 12 percent in 2014, up to $1.53 billion. The company's total retail used gross profit rose to $130 million, an increase of nearly 7 percent over 2013’s result.

The company moved 75,173 total used retail units last year, an 8-percent increase year-over-year. Same-store sales came in at 72,868 units, a 5-percent increase over last year’s numbers.

In the fourth quarter, Asbury sold 18,205 used retail units overall, a 9-percent increase over 2013’s Q4. On a same-store basis, the company sold 17,553 used retail units, a 5-percent year-over-year increase.

“Our performance this quarter was highlighted by solid growth in new and used vehicle sales, combined with strong growth in parts and service,” said David Hult, Asbury’s executive vice president and chief operating officer. “We look forward to 2015 as we continue to build a culture focused on continuous improvement and exceptional customer service.”

Among the company’s records, Asbury reports a record Q4 adjusted EPS from continuing operations of $1.07 per diluted share, a 22 percent increase over 2013’s Q4. For the year, the adjusted EPS from continuing operations increased by 24 percent, up to $4.37 per diluted share.

“Asbury is pleased to announce another record fourth quarter adjusted EPS from continuing operations,” said Craig Monaghan, Asbury’s president and chief executive officer. “The overall automotive retail and lending environments remain strong. We will continue to execute our two-part strategy: to drive operational excellence and to deploy capital to its highest returns.”

Franchised Dealers Set 3rd Straight Throughput Record

DETROIT - 

Franchised dealers are selling, and selling fast, as they set an all-time record for new-car sales per store for the third straight year in 2014.

According to Urban Science’s Automotive Franchise Activity Report, franchised dealerships sold an average of 941 new units each last year, based on vehicle sales of 16.5 million.

"Sales throughput for dealers has achieved another record level due to a great sales year and a stable dealer count. This is the third year in a row that this record has been broken," said Mitch Phillips, global director at Urban Science. "2015 looks promising. With a stable dealer count, as we have seen over the past several years, and the strong sales forecast which the industry is now predicting, we could see this record broken again."

This record-setting year could have resulted in part from a slight increase in franchised dealerships in the U.S. since the end of 2013.

As of the end of 2014, there were 17,953 dealerships in the country, marking a 0.6-percent increase from December 2013’s total of 17,838.

The most significant spike in dealership numbers were seen in Texas, which added 18 dealerships, and California and Florida followed with an increase of 13 dealerships each.

Georgia was up next with an increase of 12 dealerships, and North Carolina added seven stores.

Franchised dealerships were also taking on additional nameplates in 2014. According to the report, the number of brands franchised dealers sell rose 0.5 percent last year, moving up to 31,609 as of the end of 2014.

AutoNation Says Success Doesn't Hinge On Used Values

FORT LAUDERDALE, Fla. - 

After reporting several all-time quarterly and yearly records for 2014, AutoNation has positioned itself to step boldly into the new year.

Mike Jackson, the company’s chairman and chief executive officer, fielded several questions during the company’s quarterly earnings conference call on Tuesday, painting a picture of a solid 2015 ahead for his crew, including a continued investment in its consumer-centered SmartChoice Express endeavor, which Jackson believes, in his five-year plan, will be seen as great money invested.

One question, in particular, provided a glimpse into just how confident Jackson is in his company while approaching the used-vehicle market. When asked what he thought about the used pricing volatility that many in the industry are anticipating, Jackson revealed that he sees a positive opportunity no matter which direction the prices go.

“Well, if we look at the chart of the vehicle return rate, it definitely increases in 2015,” Jackson said. “It hasn’t happened yet, but it will in 2015. What that does to valuations, we will adjust for; but here’s my point: let’s say used values come down, it causes more availability. My acquisition cost has gone down, and I have more of them to buy. If I look at our used-car capabilities that we’ve developed, that makes me even more optimistic about the used-car business.”

Jackson continued on to point out that he believes AutoNation has situated itself in a position where it can handle anything that’s thrown at them — although he doesn’t believe that anything extreme is coming.

“I think we’re really at a point where we can succeed either way,” Jackson said. “Now, could there be an adjustment period if it moves with a lot of volatility, quickly? Of course. There could be a quarter where that happens. But then you’re on a new level, and I have more margin space between used cars and new cars. So, we’re optimistic about the used-car business, and we think whatever’s coming, there won’t be extreme volatility to it. I think that’s the most important point, and we’ll be able to adjust to whatever the new circumstances are.”

Outside of the used market, Jackson also believes that the automotive segment should anticipate an eclipse of new-vehicle sales seen last year.

“As far as 2015 is concerned, I think the safest prediction I’ve ever made about industry unit volume breaking through 17 million, or being above 17 million, is one of the lowest risk predictions I’ve ever made,” Jackson said. “Seventeen million will happen in 2015; we’re very confident about that. And if I look at the pent-up demand, the economy moving at a better rate, there will be good years after that, too soon to say what the actual number will be.”

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