The slowdown in DaimlerChrysler vehicle sales failed to dampen revenue performances by the major publicly owned consolidators in the second quarter, all of which showed gains above the comparable period of 1999.
Chief executive and financial officers of the five New York Stock Exchange-listed consolidators say sales of other brands more than made up for the DC decline. All but top-ranked AutoNation Inc. and UnitedAuto Group saw their net profits rise, as well.
AutoNation's gross revenue advanced 5% to $5.34 billion in the June period, but its net income slipped 0.5% to $96.6 million from $97.1 million a year earlier because of rising inventory costs and a shift towards lower-margin new-car sales.
The new runner-up in consolidator income - Sonic Automotive - recorded a revenue jump of 114% to $1.5 billion, reflecting its acquisition late in 1999 of the 29-store FirstAmerica chain based in northern California. Net income rose 122% to $22.5 million - its 11th quarter in a row of greater than 50% growth in earnings per share.
Sonic's chief financial officer, Theodore M. Wright, says the group sharply cut fleet sales to save costs. The Chrysler slide was offset, he adds, by sharp increases in Honda and BMW volume, among other brands.
"Our fixed absorption average reached 80.23% in the quarter, which could lead the industry," he says.
UnitedAuto Group led off the consolidator reports with news of a 15.4% jump to $1.2 billion. But the Detroit-based chain saw its net income decline from $8.6 million to $7.1 million after a one-time charge of $4 million resulting from repurchase of the company's 11% subordinated debt.
However, gross profit for UAG rose 17.1% despite what Chairman and CEO Roger S. Penske calls an "increasingly challenging operating environment."
Group 1 Automotive's chairman, president and CEO, B.B. Hollingsworth Jr., hailed double-digit gains in revenues and net income. Revenues grew 49% to $930.1 million, while net profit advanced 30% to $11.9 million.
Mr. Hollingsworth singled out Toyota, Ford and Honda as among Group 1's "strongest performers" in the face of the Chrysler setback. He also cited "a shift in the company's merchandising mix as new-vehicle sales, which carry the lowest margin, accelerated rapidly."
Lithia Motors' 49 western dealerships racked up a revenue boost of 36% to $417.9 million in the June quarter. This led to a rise of 35% in net profit to $6.2 million.
Lithia Chairman and CEO Sidney B. DeBoer says the quarter's results "exceeded Wall Street estimates for the 15th consecutive quarter...and help to answer the question as to how we would perform in a slowing sales environment."
Mr. DeBoer says Lithia's DaimlerChrysler stores fell 4.2% but the deficit was overcome by "particular strength in Ford, Volkswagen and Nissan." DaimlerChrysler accounts for about 40% of total Lithia sales.
In a quarter when dealership purchases involving consolidators were minimal, UAG purchased four stores - Houston's Goodson Honda and Goodson Pontiac-GMC, West Houston's Goodson Spring Branch Honda and Buick-Pontiac-GMC of Cerritos, CA, in the high-volume Cerritos Auto Square Mall.
Sonic Automotive purchased the two Cashman Cadillac dealerships in Las Vegas, NV, after adding Larry Miller Chevrolet in Tulsa, OK. The only Cadillac dealerships in the fast-growing Nevada metropolis, the Cashman dealerships will be added to a Las Vegas "spoke" platform that will include a new Honda West building and Nevada Dodge.
Larry Miller Chevrolet, renamed Speedway Chevrolet, was acquired by Sonic from the Larry H. Miller network based in Murray, UT. Sonic President B. Scott Smith says it was sold because it was remote from Mr. Miller's Rocky Mountain-based core and was "underperforming" in a market containing one of Ford's five "Auto Collections."
Sonic also announced a $150 million increase in its capital improvements and acquisition credit, divided between Ford Credit and DaimlerChrysler Financial Services. Sonic has bought nine stores already this year. and plans more later "primarily in sunbelt markets," according to Mr. Smith.
The Charlotte, NC-based network also sold six stores to new owners, with Mr. Smith saying they had been acquired as parts of groups but "could not benefit from efficiencies Sonic applied to hubs in their markets." Among those sold were Chrysler-Plymouth-Jeep dealerships in Chattanooga and Cleveland, TN, and a Mercedes-Benz store in Panama City, FL.