Dealer Lab: April financials take a downturn

Publish Date: 
Jun 27, 2012
By Joe Delmont

EDITOR’S NOTE: The Dealer Lab project is a joint effort between Dealernews and PowerHouse Dealer Services, a consulting firm run by former dealer Bill Shenk, detailing his efforts to return Florida Motorsports to profitability. When he took over management of the two stores — located in Naples and Punta Gorda, Fla., — in July 2009, the Punta Gorda store had been losing money. Shenk and a partner have purchased the Punta Gorda store and renamed it Destination Powersports. Shenk no longer is involved in the Naples location.

The financial information in this report is taken from the dealership’s Composite Report supplied by Shenk and is prepared as part of the dealership’s participation in the PowerHouse Dealer 20-Group. The Composite Report is produced from the store’s monthly financial report. In preparing these Dealer Lab reports, Dealernews reviews the dealership’s unaudited P&L statement and Balance Sheet and its Composite Report.

THE APRIL FINANCIAL report for Destination Powersports in Punta Gorda, Fla., contains the kind of information you don’t want to talk about. The good news is that the dealership made a profit of more than $12,000, but the bad news is that net income was off almost $40,000, or nearly 77 percent from April 2011.

“This really is a tough dealership marketplace, compared to the average dealer situation, based on size and makeup of the local population and our facility and location,” Bill Shenk says.

For the month of April, the dealership earned $12,269, on total revenues of $508,961, down sharply from the earnings of $52,011 on revenues of $698,208 it posted in April 2011.

Year-to-date numbers were off as well, with earnings for the first four months dropping by 27 percent. For the first four months of 2012, the dealership earned $79,045 on total revenues of $1.9 million, compared to the net income of $108,589 it earned in the same period in 2011 on slightly higher revenues.

Much of the decline for the four-month period came in April. For the quarter ending March 31, the dealership earned $66,777 on revenues of $1,402,452, with earnings outpacing first quarter of 2011 by about $10,000.

The dealership’s big hit in April came from a sharp drop in unit sales, with new and used PWC and motorcycles sinking from 52 units to 39 units. Sales of new motorcycles dropped from 23 units in April 2011 to 17 units this April, and sales of used bikes dropped from 18 to 16 during the same periods.

Revenue per employee on the sales side dropped nearly $50,000, skidding from $121,599 in April 2011 to only $72,528 in April this year.

Misery loves company. However, when comparing the dealership’s sales performance with dealers in adjacent counties, the picture is more positive. Punta Gorda is located in Charlotte County. The county to the north, which includes the city of Sarasota, is Sarasota County. Lee County, which includes Fort Myers, is south. Charlotte supports a Harley-Davidson dealership in addition to Destination Powersports. Sarasota has four metric dealerships, and Lee has one metric dealership in Fort Myers.

“We sold 30 new and used metric units, without Honda, in April,” Shenk says. “If we sold 30 without Honda, based upon population and Harley sales by county, Sarasota County metric dealers should have sold 90 units, not the 59 they reported, and the Lee dealer should have sold 150 units, not the 43 he sold.”

At the same time, inventories were much higher for Destination Powersports than last April — 310 units compared to 159 units. It was especially noticeable in motorcycles, where the dealership had twice as many new bikes this year as last (98 vs. 49) and 36 used bikes, up from 23 last April. Unit inventory this April was $2.8 million, compared to $1.2 million in April 2011.

Flooring also was up this year, $6,972 compared to $4,119 last April.

Sales of PWC dropped by nearly 50 percent (11 to six units), but sales of SxS units climbed from two to six units year over year (YoY).

Service department operations during April also slumped badly, even though the dealership employed 7.45 employees compared to 5.0 employees last year. Department revenues were down almost $20,000, dropping from $44,379 to $24,111.

Customer repair orders (RO) dropped by 24 percent, declining from 164 to 124 YoY in April. At the same time, customer labor revenue dropped from $29,514 to $18,685.

Service problems were directly tied to family difficulties experienced by the service manager, Shenk says. A similar situation existed in the Parts department. The problem was solved, he says, by replacing both the Service manager and the Parts manager.

Parts performance often is tied directly to the performance in Service, and that was the case here in April. Revenue from Parts ROs dropped by more than 52 percent in April. Parts and Accessories revenue dropped in April from $91,594 to $68,944.

Bill Shenk is owner of and 20 Group moderator at PowerHouse Dealer services, a dealership consulting/training company. To join a PHD 20 Group, contact Shenk at 877-PHD-0911 or Bill@phdservices.com.

This story originally appeared in the Dealernews July 2012 issue.