Auto retailers struggle to offset new car slump
DETROIT (Reuters) - Major U.S. auto retail groups on Tuesday posted quarterly results that underscore their mixed success in offsetting pressure from slumping new vehicle sales through sales of used cars, financing and service operations.
Penske Automotive Group Inc (PAG.N), the No. 2 dealership group by unit sales, and Group 1 Automotive Inc (GPI.N), the No. 4 dealership group, both reported earnings above analysts' expectations, sending their shares higher.
Group 1 shares were up 1.5 percent and Penske shares up 3.4 percent on Tuesday afternoon on the New York Stock Exchange.
Sonic Automotive Inc (SAH.N), the No. 3 U.S. auto retailer, posted an earnings decline and kept intact a previously lowered full-year earnings forecast. Its shares slipped 1 percent.
All three dealership groups reported a drop in new vehicle sales in line with a slumping U.S. auto industry, which was hit hard in the first three months of 2008 by declining consumer confidence, rising gas prices and a slumping housing market.
Bloomfield Hills, Michigan-based Penske, which is most heavily weighted toward BMW, Toyota and Honda sales, posted a decline of 2.3 percent in same-store retail sales revenue.
On an industry-wide basis, car and truck sales were down almost 8 percent in the United States in the first quarter from a year earlier. Analysts and industry executives have said results for April point to the risk of even weaker sales for the current quarter.
Houston-based Group 1 and Charlotte, North Carolina-based Sonic posted same-store sales declines near 4 percent.
All three auto retailers said they were focused on offsetting weak demand for new vehicles by stepping up sales of higher-margin used cars, providing financing and offering repairs and service.
Penske said it had been able to increase its gross margin to 15.4 percent in the first quarter from 14.9 percent a year earlier by focusing on used-car and parts operations.
The company reported net earnings that more than doubled to $33.9 million, or 36 cents per share, from $14.6 million, or 15 cents, in the same quarter a year ago.
"While the new vehicle sales environment was difficult, particularly in the United States, our business continued to perform well," Chairman Roger Penske said in a statement.
Penske left its full-year earnings forecast range from continuing operations unchanged at $1.63 to $1.71 per share.
Group 1 also kept its forecast steady for earnings of $2.95 to $3.25 per share, assuming the U.S. auto industry manages to see sales stabilize in a range of 15 million to 15.5 million vehicles this year.
MARKET GETTING 'NOTICEABLY WEAKER' Continued...
