Public retailers: Rebound starting

The five publicly traded auto retailers that have reported first-quarter results are experiencing a rebound in vehicle and service-and-parts sales from early April lows amid the coronavirus pandemic.

Penske Automotive Group Inc., the nation's second-largest new-vehicle retailer, reported May 6 that its sales are improving weekly. The news comes after a first quarter in which the dealership group's net income slid sharply as shelter-in-place orders were put in place by state and local governments in March.

In the last 10 days of April in the U.S., new-vehicle sales rose 33 percent, and used-vehicle sales jumped 51 percent, compared with the first 10 days of the month, Penske officials said last week. The company's U.S. parts and service business has risen about 9 percent for each of the last few weeks compared with the previous week, CEO Roger Penske said in a call with analysts.

Penske's results appear even better in early May. Through the first five days of May, the retailer's U.S. new-vehicle sales were down 28.5 percent and used-vehicle sales were down 17.7 percent compared with the previous year's results. That's much better than April when Penske's U.S. new-vehicle sales tumbled

53 percent and used-vehicle sales fell 42 percent vs. April 2019.

Other public dealership groups, which all reported lower first-quarter net income and revenue, cited similar trends.

For Group 1 Automotive Inc., U.S. retail sales plummeted 55 percent in the first week of April but steadily recovered to finish April down 26 percent. Service-and-parts sales dropped 48 percent in the first week of April but were down 30 percent in the last week of the month.

Daryl Kenningham, Group 1's president of U.S. and Brazil operations, said in a call with analysts last week that automaker promotions helped retail sales.

"A lot of what's driving it are the incentives that are out there, including the 0 percent financing that's available by many OEMs," Kenningham said.

With the improvements, Group 1 has begun to recall some of the 4,800 U.S. employees it had furloughed.

Lithia Motors Inc. noted its April results improved over late March, while Sonic Automotive Inc. said it expects a return to pre-COVID-19 sales and service levels this summer.

Asbury Automotive Group, too, said last week that its business improved incrementally on a weekly basis in April. Asbury started the month with declines of 50 percent in sales and 60 percent in service. By the final week of April, sales were running 25 percent below year-ago figures, and service was down 30 percent.

Asbury, which furloughed 2,300 workers, said it purposefully didn't let technicians go and continued to pay them at normal levels despite having less work for them.

While same-store revenue was down 35 percent in April, Asbury CEO David Hult told analysts last week that the company expects May's same-store revenue drop to be at 15 percent.
Penske Automotive plans to recall 500 furloughed U.S. employees this month, mostly in parts and service. The company furloughed about 15,000 people, or 57 percent of its global work force. It also terminated about 500 employees globally, officials told Automotive News last week.

Penske aims to emerge from the crisis a leaner organization, trimming $75 million to $100 million in annual costs.

Roger Penske told Automotive News that savings will come in part from lower floorplan interest, reduced marketing, cuts in demonstration vehicle costs, lower capital expenditures and even possible consolidation of offices.

"We'll be structurally different," Penske said. "I think our employees, some will work from home. We will have technology that we really hadn't had our people trained [on who] are now familiar with it, so we'll be able to reduce the cycle time on the sales process."

AutoNation Inc. reports results Monday, May 11.