The two largest auto dealer groups operating in the United States reported large increases in Q1 earnings and profits today. It was the latest sign that a slow recovery is well underway in the auto industry.
However, the new luxury vehicle business, where broken out, had relatively weak results compared to other segments. Luxury cars, of course, were once thought to be recession proof and discount proof, but that is no longer the case as discounts are increasing along with competition from non-luxury autos with high levels of equipment.
Customers don’t need to pay more to get more – the cornerstone of luxury marketing. In fact, given huge depreciation rates on luxury cars along with certified used car programs, customers must be willing to pay more for a new car and get less at trade-in time in the image driven segment.
AutoNation, (NYSE: AN) the U.S.’s largest automotive retailer, said 2012 first quarter revenue totaled $3.7 billion, compared to $3.3 billion in the year-ago period, an increase of 10%, mostly from stronger retail new vehicle sales. AutoNation’s new vehicle sales increased 8% on a same store basis and 10% overall, slightly outpacing the industry. Net income was $74 million, or $0.56 per share – a record – compared to $70 million, or $0.46 per share, year-over-year, for the same period a 22% improvement.
Penske Automotive Group, Inc. (NYSE: PAG), with North American and European operations, posted the most profitable first quarter in company history. Q1 revenue for common shareholders increased 37.3% to $50.0 million, with earnings per share up 41.0% to $0.55 per share. This compares to income for common shareholders of $36.4 million, or $0.39 per share in the same period last year.
“We have increased our 2012 U.S. industry new vehicle sales forecast to mid-14 million units, as we see continued momentum in U.S. auto sales,” said Mike Jackson, AutoNation CEO.
AutoNation has three operating segments: Domestic, Import, and Premium Luxury. The Domestic segment has stores that sell vehicles manufactured by General Motors, Ford, and Chrysler; Import has stores that sell vehicles manufactured primarily by Toyota, Honda, and Nissan; and the Premium Luxury segment is comprised of stores that sell vehicles manufactured primarily by Mercedes, BMW, and Lexus. Segment results for Q1 were:
- Domestic segment income was $50 million compared to $43 million y-o-y. First quarter Domestic retail new vehicle unit sales increased 16%.
- Import segment income was $62 million compared to $55 million y-o-y. First quarter Import retail new vehicle unit sales increased 6%.
- Premium Luxury segment income was $59 million compared to $58 million y-o-y. First quarter Premium Luxury retail new vehicle unit sales increased 14% – but note that the income only increased 1%.
Penske Automotive Group showed a similar small increase in luxury sales revenue. The dealership company, which operates primarily in the U.S. and the United Kingdom, increased revenues by 17.9% to $3.2 billion, with an improvement in total retail unit sales of 18.1% and growth in the Company’s used-to-new ratio to 0.89 to 1 from 0.78:1 in the same period last year.
However, revenue from luxury brands only increased 1% in Q1. Revenue from used car sales at Penske increased more than 1% at Penske, but it wasn’t broken out by segment.
“In light of perceptions surrounding our international markets, I am particularly pleased with the performance of these businesses. During the first quarter, our international-based same-store retail revenue increased 5.9%.,” said chairman Roger Penske.
