From the third quarter of 2009 through the first quarter of 2016, the seven publicly traded dealership groups strung together 27 consecutive quarters of increased same-store retail used unit sales.* That streak ended last quarter when the sales-weighted change was -0.9%.
Blame Takata. Asbury, for example, noted that 10% of its total inventory was tied up in “stop-sale” units. At some individual stores the share was as high as 40%. Sonic offered an even more telling story on its earnings call - after breaking down inventory into affected and unaffected buckets, they found an 8% increase in year-over-year sales for unaffected models, but a 48% decline for affected units.
On the positive side, the headwind from “stop sales” should become less severe as the third quarter progresses and will eventually become a positive as an ever-higher number of units become retail ready. Additionally, it is nice to note, that, in second quarter, the public dealer groups (in the aggregate) did a good job of maintaining gross. The sales-weighted gross margin declined from its year-ago level, but it was level with the first quarter. Typically margins are lower in the second quarter than in the first.
- The seven dealership groups are CarMax (KMX), AutoNation (AN), Penske Automotive (PAG), Sonic Automotive (SAH), Lithia (LAD, Group 1 Automotive (GPI), and Asbury (ABG). In this analysis, CarMax’s fiscal quarter reporting was shifted forwarded one month to more closely correspond with the calendar year reporting of the other six dealer groups.