PG&A Stats Indicate Stability Returning To Industry

This month, we’ll be comparing September data from a good-performing metric 20-group with the National Norm (NN) numbers and the averages for the Top 5 dealers for this group in each category.

These stats changed relatively little for most categories compared to the numbers I reported back in May 2013. That is a welcome indicator of stability returning to the industry.

Total store sales continued to increase as compared with last year, and gross margins were up for the group and NN dealers but stayed flat for the Top 5. It’s good to see all of them around the 25 percent level — 25 percent is critical for profitability. It’s important to recognize that your PC&A department is a major contributor to your store’s gross profit. It makes up a full third of the gross profit for the Top 5 dealers.

The Top 5 continue to work harder at getting people in the door and getting customers to the write-up stage (working contacts). While they lead the gross profit per employee category, the NN dealers are catching up. Having the right people with the right training is the key here.

PG&A gross profit dollars per vehicle sold is a good comparison measurement. Take the total sales and divide by the units sold and you have it. It works for all sizes of dealerships. Where is your store in comparison to these numbers?

The Top 5 dealers are still managing to hold almost 5 percent more gross profit on hard parts, clothing and accessories than the rest of the dealers. How? Better use of the programs (taking advantage of pre-season and promo order discounts), better use of price escalators, less discounting at the counter and counter staff who are trained to build value to overcome price. A good open-to-buy process will help here as well. It helps you stock the right stuff at the right time. If you do this, you will have fewer end-of-season “blow outs.”

Pay attention to the personnel expenses as a percent of department gross profit. Use this benchmark to determine how realistic you are with staffing levels and pay plans.

Part 2 shows that we have an increased invoice volume, but operating profit has remained pretty flat. Notice how low the obsolescence (no sale for 12 months) figure is for the Top 5? Part of that is their tight control over inventory. They have good turns and stock carefully to avoid having parts that don’t turn. They monitor their slow seller reports and anything that hasn’t turned in six months is sold as soon as possible (before it hits the 12-month mark). If they do have obsolescence, they either get rid of it or write it out of inventory and take the tax break. If you have obsolete inventory, follow the “Three Ds” rule: discount to market value and sell it; donate to charities or other organizations; dumpster it and take the write-off.

As I have pointed out in the past, the gross profit per employee measurement is another one that can be used by any size of dealer. Compare your numbers with these as an indicator of staffing levels or training needed. 

Steve Jones, GSA senior projects manager, outlines dealerships’ best business practices to boost margins, increase profitability and retain employees. His monthly column recaps critical measurements used by the leading 20-group dealers. Access to the new Voyager 5 data reporting and analysis system is available to any dealership for nominal fee. For more information on GSA’s management workshops, data reporting system, dealer 20-groups, on-site consulting or training, send Steve an email at [email protected] or visit www.gart-sutton.com.

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