The “super six” chalked up more than 1 million new-vehicle sales for the first time and, while doing so, sailed beyond $50 billion in total revenues.
WithMotor Co. and Corp. brands under pressure, the six “publics” turned to income generators such as service and parts, used vehicles and finance and insurance to make up the shortfalls from the No.1 and No.2 auto makers.
Each shareholder-owned megadealer gained in total revenues last year. Five of the six (Inc. being the exception) boosted new-vehicle sales, despite the and GM soft spots.
The publics' revenue growth amounted to 9.9% for the year, another record. The trend was signaled in February by AutoNation CEO Mike Jackson, when he declared that, after a fall filled with Southeastern region hurricanes, “the fourth quarter was driven by a strong revenue growth resulting from ongoing operational enhancements and an improved industry environment.”
As the No.1 megadealer, with $19.4 billion in revenues last year and 410,621 new-vehicle sales, AutoNation took a big hit when storms struck its 70 Florida dealerships. The company's rebound, even after an angry Jackson had complained of being overloaded with inventories of domestic vehicles last October, was surprising in view of the “line in the sand” drawn by Jackson and other megadealer CEOs – notablyAutomotive's Kenneth B. Gilman – on inventory excesses.
When Jackson reported in February that AutoNation had slashed its stockpile of unsolds by 18% in the fourth quarter, to a 53-day supply, it was a sign that the sector as a whole had wound up the year lean, mean and on a roll.
Reports of record 2004 revenues followed the AutoNation lead-in. Second-ranked UnitedAuto Group (UAG) almost reached the $10 billion mark at $9.88 billion, a gain of 15% from 2003.
Roger Penske: “Great time to be auto retailer.”
UAG retailed 178,012 new vehicles, with 26.6% of its revenues coming from import-brand dealerships. Chairman and CEO Roger Penske notes the scope of the uptick across the board, observing that service and parts income rose 12.1% as all departments prospered.
“It's a great time to be an auto retailer,” says Penske, arguably the best-known “car dealer” in the U.S.
He adds, “UnitedAuto has been able to grow steadily and build great new malls like the Chauncey Ranch's 11-store complex in Scottsdale, AZ. There's no better feeling as a dealer than to see all departments growing and to be able to finance renovations or new construction out of the increased revenues.”
Sonic joined its peers in raising revenues last year. Firmly in third place on the Ward's Megadealer 100 leader board, Sonic retailed 151,479 new vehicles compared with 150,419 in 2003, and boosted revenues from $6.95 billion to $7.39 billion.
The fourth quarter turned out “stronger than anticipated,” says Chairman and CEO O. Bruton Smith. President and COO Jeffrey Rachor says Sonic added 280 new service stalls in 2004 and will add 130 more this year.
Rachor also says Sonic, in accord with other public mega-stores, is streamlining its dealer portfolio. Seventeen franchises were discontinued by Sonic in 2004 and into this year. “Targeted acquisitions will include luxury and high-volume import brands in the company's existing markets,” Rachor says..
Group 1 Automotive reclaims fifth place on the Ward's Megadealer 100 from another publicly owned megadealer,Automotive.
Group 1's revenues increased 30.8% to $5.43 billion, edging past Asbury's $5.30 billion.
In another key metric, Group 1 outsold Asbury in new vehicles, 117,971 to 110,881 units (including fleet). Group 1 Chairman and CEO B.B. Hollingsworth, Jr. reports that, alone among the public six, Group 1 suffered a net income decrease last year. The network took an “impairment charge” for an underperformingMotor Corp. store in the Los Angeles market, although this was more than offset by acquisition of 23 franchises last year.
“New-vehicle inventories have remained a concern for us,” Hollingsworth acknowledges, noting that Group 1 has a high preponderance of Ford stores but is trying, like the metro public megas, to shift its focus to import and luxury brands.
Group 1 also is contending with soft Houston and Atlanta markets, where its dealers are heavily concentrated.
Asbury experienced a “strong balanced performance in the fourth quarter and for 2004 as a whole,” Gilman declares. Asbury is reorganizing nine “platforms” into four regions – Florida, West, mid-Atlantic and South – with Mississippi and Missouri remaining as stand-alones.
Asbury bought seven dealerships last year – five in California – representing twomotor Co. Ltd. and two Motor Co. Ltd. franchises and one each of Dodge, and Mercedes-Benz brands. Gilman says Asbury intends to sell off under-performing stores.
Lithia Motors, based in Oregon, again enjoyed a growth year as the only member of the public sextet devoted almost solely to medium-size markets and whose top volume brand is theGroup.
Chairman and CEO Sid DeBoer reports full-year revenues grew 9% to $2.75 billion, while new-vehicle sales increased 10% to 57,915. Used-vehicle sales rose 4%, service and parts sales 16% and finance and insurance 13%.
“Operating margin improvements increased 3.5% due to a network that runs on strong operating systems common to all stores,” says DeBoer.
Lithia made a rare acquisition early this year in a metro market, purchasing a-Dodge-Jeep store in Omaha, NE, across from a Lithia Ford dealership. But other fourth-quarter acquisitions were in medium-size markets, which it prefers – Chrysler and Jeep franchises in Santa Rosa, CA; of Anchorage, AK; a Chrysler-Dodge-Jeep dealership in Santa Fe, NM; and a Dodge store in Helena, MT.
So far this year, Lithia has bought even more Chrysler Group stores, including Chrysler and Jeep franchises in Concord, CA, and a Chrysler franchise in Eugene, OR.
Lithia's brand mix for last year was Chrysler Group 40%, GM 24%, Ford-Lincoln-Mercury 9%,8% and 4%, based on revenues.
DeBoer says full-year F&I revenues from Lithia's 87 stores continue above the $1,000-per-vehicle mark at $1,027, reaching a record $1,084 per unit in the fourth quarter.
“We are targeting expansions in our existing markets because we want to be No.1 in each one,” DeBoer says.
All members of the public six are listed on the New York Stock Exchange. Their CEOs tend to believe that stock prices in the sector as ratios of earnings per share are well below those of other industries.