DealerLAB: Leaner, meaner and ready for a new location

Publish Date: 
Nov 6, 2013
By Joe Delmont

Revitalized parts, service, accessory departments fueling sales as our Dealer LAB gets ready for a big move.

ACTIVITY WAS SLOW in August on the Destination Powersports sales floor as unit sales dropped year-on-year (YoY) from 57 to 37 units. But reduced costs helped the dealership post an increase in earnings for the month. Earnings for the year also were up substantially over the same period in 2012.

For August, Destination PS earned $23,261 on total revenues of $440,096. That’s an increase in net income when compared to the earnings of $15,092 produced in August 2012 on higher revenues back then of $548,355.

Gross profit (GP) this year was $120,934, or 27.5 percent of total sales, compared to $115,377, or 21 percent of total sales in August 2012. The improved GP is primarily the result of an improved product mix, says Bill Shenk. A gross profit margin of 26 to 30 percent of total revenues reflects a solid year, he explained.

So far the dealership is performing much better than it did in 2012. Earnings through August were $204,858 on total revenues of just over $4 million, compared to earnings of $126,536 last year on total revenues of $3.9 million.

Although total revenues YoY were about flat, last year the dealership sold 406 units, nearly six percent more than the 382 it had sold through August 2013. But dealer inventories were too high last year, so some of the units had to be sold at lower margins. Therefore, unit sales revenues were about flat by August 2013: $3.130 million compared to $3.152 million last year.

Floor traffic remained stable in August but was up more than 16 percent for first eight months of the year. Traffic on the show floor has improved, Shenk said, because the parts and service departments are functioning at a higher level – this brings in more customers who in turn visit the show floor.

“You can sell a lot of units if you lower the price enough.
               But you give up profit at the same time.” 
—Bill Shenk

“I believe traffic is up because parts and service are back on track,” Shenk said. “They were off last year, and we weren’t selling — we weren’t good on the phone. Now they’re getting traffic in, and that shows on the show floor even though August motorcycle sales here and in the state of Florida are way off. Florida motorcycle dealers are off by about half, and we are up 16 percent. That’s the result of a huge handoff from parts and service.”

Parts, accessories and service performed nicely in August, YoY, with total revenues from these three segments up almost $25,000, or nearly 35 percent, over August 2012. (continued)