Nine Key Metrics of Comparison For the Franchised Auto Retailers

There is a lot to digest from all of the earnings calls Tuesday.

So for now, I just want to give you nine key metrics now that all of the franchised auto retailers have reported second quarter results.

Read AutoNation's Q2 2007 Earnings Call Transcript.

2Q07	Asbury	AutoNation	Lithia	Group 1	Penske	Sonic
Operating income (including floor plan) per store	$480,102	$607,631	$209,259	$442,687	$237,383	$386,767
Average gross profit per new vehicle	$2,258	$2,115	$2,101	$1,994	$2,971	$2,414
Average gross profit per used vehicle	$2,116	$1,766	$2,497	$2,056	$2,435	$1,862
Wholesale gross per used retail	$39.27	$215.05	$67.89	$(36.47)	$39.01	$104.43
F&I profit per vehicle	$1,000	$1,097	$1,116	$1,009	$967	$1,013
Floor plan interest expense per vehicle	$257	$241	$286	$223	$250	$323
Parts and service gross as % of SG&A	53.1%	55.4%	41.5%	50.0%	51.6%	62.0%
SG&A as a % of gross	74.7%	71.3%	75.6%	76.3%	78.5%	74.2%
Depreciation and amortization per store	$60,773	$86,747	$47,194	$52,697	$42,884	$57,507

Source: company reports, efficient insights llc

2Q06

2Q06	Asbury	AutoNation	Lithia	Group 1	Penske	Sonic
Operating income (including floor plan) per store	$469,828	$796,970	$250,063	$465,731	$229,284	$267,192
Average gross profit per new vehicle	$2,220	$2,174	$1,988	$2,103	$2,921	$2,459
Average gross profit per used vehicle	$2,194	$1,786	$2,560	$2,116	$2,433	$1,900
Wholesale gross per used retail	$0.93	$208	$62.50	$(41.60)	$45.07	$24.77
F&I profit per vehicle	$971	$1,084	$1,099	$926	$940	$826
Floor plan interest expense per vehicle	$250	$233	$272	$256	$232	$287
Parts and service gross as % of SG&A	51.0%	52.5%	39.8%	49.1%	50.7%	56.4%
SG&A as a % of gross	74.8%	70.2%	73.7%	75.1%	77.9%	79.8%
Depreciation and amortization per store	$58,540	$78,409	$41,740	$47,011	$36,503	$45,073

Source: company reports, efficient insights llc

% Change 2Q07 versus 2Q06

2Q06	Asbury	AutoNation	Lithia	Group 1	Penske	Sonic
Operating income (including floor plan) per store	+2.2%	-23.8%	-16.3%	-4.9%	+3.5%	+44.8%
Average gross profit per new vehicle	+1.7%	-2.7%	+5.7%	-5.2%	+1.7%	-1.8%
Average gross profit per used vehicle	-3.5%	-1.1%	-2.5%	-2.8%	+0.1%	-2.0%
Wholesale gross per used retail	N/A	+3.5%	+8.6%	-12.3%	-13.4%	N/A
F&I profit per vehicle	+3.0%	+1.2%	+1.5%	+9.0%	+2.8%	+22.7%
Floor plan interest expense per vehicle	+2.6%	+3.5%	+4.9%	-12.9%	+7.5%	+12.5%
Parts and service gross as % of SG&A	+200 basis points	+300	+170	+90	+90	+560
SG&A as a % of gross	-10 basis points	+110	+190	+120	+60	-560
Depreciation and amortization per store	+3.8%	+10.6%	+13.1%	+12.1%	+17.5%	+27.6%

Source: company reports, efficient insights llc

 

A few things to consider about the comparable metrics

AutoNation's second quarter 2006 results exclude the debt repayment charge. 

Penske per store data is based on the number of franchises. And I estimated Sonic finished the quarter with 150 stores (173 franchises were reported in the release).

Also, keep in mind the companies have different accounting practices.  For example, some dealers charge their used vehicle department for reconditioning work, recording it as a cost of sale in used vehicles, but a profit in service and parts.  Dealers like Lithia, on the other hand, do not account for internal parts work as service and parts profit.  And this is just one of many differences among the companies.

This is why I often try to focus your attention on the year over year changes versus the actual dollar numbers.

I also want to make sure you realize that when I am talking about wholesale gross profit per used vehicle, I mean per retail used vehicle. 

What do I mean by this? 

Well if a dealer sells a car for $5,000, and bought it for $4,000, they would have a $1,000 gross profit. 

Generally, dealers source their used vehicles from people buying new vehicles at the store.  But that doesn't give them all the products they need.  So they also source from auctions.  Either immediately after the trade-in, or after a car has been sitting on the lot for 60 days or so, the dealer concludes: "this just ain't working."  And as a result, he/she sells the vehicle at auction (thus deemed a wholesale vehicle). 

So the idea of wholesale is to generate retail used vehicle sales.  The dealer buys the vehicle hoping to retail, but recognizes that some will end up in wholesale. 

Now there is a trend emerging in the market that is creating the possibility for these units to become profit centers in and of themselves (CarMax is experimenting with this a little).  But that is a completely different issue and not how dealerships are typically run today. 

So if the primary function of wholesale vehicles today is to generate used vehicle (retail) sales, I don't think I am telling you very much if I tell you what a company made and lost per its wholesale vehicles. 

Instead, you need to know how it impacted the used retail profitability.  So I have taken the wholesale profits and losses estimated for these companies, and divided it by the number of retail units. 

This way, you can see the used vehicle department's real profit per retail unit (with and without wholesale). 

Finally, keep in mind that because of the problems I have discussed in the past with all of the companies reporting discontinued operations (except Group 1), the comparable results can only be considered a "best guess" as I am not provided the historical store count on a continuing operations basis.