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 in July 2009, the two-store (Naples, Fla., and Punta Gorda, Fla.) network wasn’t in good shape — it lost money in 2007, 2008 and 2009. Shenk and a partner have purchased the Punta Gorda store and have renamed it Destination Powersports to break away from its poor reputation. Shenk no longer has ties to the Naples location.
The financial information in this report is taken from the dealership’s Composite Report suppled by Shenk and prepared for the dealership’s participation in the PowerHouse Dealer 20-Group. The Composite Report is prepared from the store’s monthly financial report. In preparing these reports, Dealernews reviews the dealership’s unaudited P&L statement and balance sheet, and its Composite Report.
The July financials for Destination Powersports were a disappointment, another losing month after the profitable months of May and June, but they were better than July 2009 by a wide margin. In July, the store lost $15,331 on revenue of $239,293. That’s a big improvement over July 2009, when the Punta Gorda, Fla., dealership lost $26,951 on total revenue of only $128,789. “With the summer heat and afternoon thunderstorms, July, August and September are tough motorcycle/ATV months in Southwest Florida,” Bill Shenk says.
Overall expenses were up in 2010 compared to 2009 — $87,746 from $80,263; individual expenses varied, with some dropping and others increasing. Flooring was the biggest gain in savings while sales payroll was the largest increase in extra expense.
“With the amount of inventory we have, and a smaller percentage of the units sold in what we consider to be our marketplace than we like, we continue to overstaff the sales department in an attempt to re-establish ourselves in the marketplace,” says Shenk.
Looking At The Numbers
On the sales side, the dealership sold only 22 units, 15 new and seven used, in July. That’s better than July 2009 when it sold only nine units, but it’s down from 39 units sold in June and the 36 in May.
However, gross sales in July 2010 were up 85 percent over July 2009, and gross profit was up 35 percent for the same period. The loss for the month was 43 percent less than that posted in July 2009.
Parts revenue also was down compared to July 2009, when revenue was $37,091. This July, parts revenue was only $24,938. However, accessories revenue in July was up more than $16,000 over July 2009, $21,918 compared to only $5,155 in July 2009. Service revenue was off, too, dropping from $28,961 in July 2009 to $21,006 in July of this year.
The P&A department brought in $769 in gross profit per vehicle sold (PVS), outperforming Shenk’s Top Gun dealers (see footnote below the table above). Generated gross profit dollars were also up on lower sales, with 2010 cost of sales (COS) at $35,413, compared to 2009 COS of $39,238. Generated gross profit increased on fewer dollars from $13,273 in 2009 to $16,925 in 2010. On the expense side, payroll was much higher, $40,305, compared to $28,261 in July 2009. Parts and service were about flat with last year, but sales payroll was up by $11,354.
There was a big improvement in July on flooring, which dropped from $15,436 in July 2009 to $6,566 this July, bringing an additional $8,870 to the bottom line.
“Based on the dealerships we track and the amount of parts and service transactions we had [customers through the doors],” Shenk says, “we should have been able to sell more units, and we were tracking to do so through midmonth, but weather was a problem.”
The dealership’s finance penetration also was very low at 36 percent. “Our dealership does not have access to GE Money Bank financing for our customers because of issues with GE in the last couple years,” Shenk notes. “However, we believe we have those issues resolved, and we hope to have them as an additional source of financing by September. According to our PHD dealer clients, this should provide a boost in approved deals and more completed sales.”
This story originally appeared in the Dealernews October 2010 issue.