Penske Automotive Q2 net income plunges 62% amid virus shutdowns

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Penske Automotive Group Inc.’s net income plunged by more than half in the second quarter amid the coronavirus pandemic that shuttered much of its international operations and limited U.S. business for most of the period.

But the dealership group said June results in both the U.S. and abroad strongly improved.

Net income for the nation’s second-largest new-vehicle retailer tumbled 62 percent to $44.8 million for the quarter, Penske reported Wednesday. Revenue slid 37 percent $3.65 billion.

“The operating environment in the second quarter was one of the most challenging in memory,” Penske CEO Roger Penske said in a statement. “Since the COVID-19 pandemic began impacting operations, our teams took action to protect the safety of employees and customers, control costs, manage vehicle inventory, maximize gross profit and preserve liquidity.

“Through these actions, our business experienced sequential improvement from month to month in units retailed, service/parts gross profit and overall profitability.”

Penske in late March said it had slashed executive pay and furloughed employees and was postponing $150 million in capital expenditures as it took measures to curb the financial impact of the coronavirus crisis. The retailer in April said it had furloughed 5,300 U.S. employees. Penske in May said it had furloughed about 15,000 employees or 57 percent of its global work force and had terminated about 500 employees globally.

Penske said Wednesday it still had about 14 percent of its employees out on furlough — or about 3,700 — at the end of June and had reduced its work force by 8 percent, or about 2,000 positions, at that point.

Same-store vehicle sales and service and parts gross profit at dealerships in Penske’s international regions fared worse in April and May than at its U.S. outlets. The company’s stores in Italy, Spain and the United Kingdom were closed during those months. Penske’s June U.S. new-vehicle sales dropped 12 percent, and used-vehicle sales fell 5 percent, while service and parts gross profit dipped just 2 percent. That was a marked improvement from steeper declines in April and May.

Penske, which didn’t break out exact sales results for the U.S., said the company’s overall same-store new- and used-vehicle sales declined 1 percent in June.

The company’s standalone used-vehicle supercenters also took a hit during the quarter, as Penske said most U.S. and U.K. supercenter operations were closed during shelter-in-place orders.

Same-store U.S. vehicle sales at the supercenters fell 61 percent in April and May, while sales and profits rebounded in June as more locations opened. Total unit sales for the supercenters — six in the U.S. and 10 in the U.K. — fell 63 percent in the quarter to 6,600, while revenue sank 57 percent to $132.6 million.

Penske said its retail commercial trucks division and ownership stake in Penske Transportation Solutions helped offset some of the steep declines early in the second quarter, though revenue for the trucks division fell 6.5 percent in the quarter and earnings dropped 21 percent for Penske Transportation Solutions.

Shares of Penske closed down 1.3 percent Tuesday to $46.52.

Sales: New-vehicle unit sales plummeted 44 percent to 30,687. Used-vehicle sales dove 41 percent to 42,606 units.

Same-store sales: New-vehicle unit sales on a same-store basis fell 43 percent to 30,687. New light-vehicle sales across the U.S. declined 33 percent during the second quarter, according to the Automotive News Data Center. Used-vehicle unit sales on a same-store basis dropped 40 percent to 42,229.

Penske, of Bloomfield Hills, Mich., ranks No. 2 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 222,800 new vehicles in 2019.

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Saurabh Shukla

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