Presidio’s latest quarterly publication highlights that dealers haven’t reduced expenses in line with profit decrease

DENVER/ATLANTA — September 9, 2024 — The average U.S. dealership’s profit continued its slide through the first six months of 2024, but the rate of decline is showing signs of leveling off, according to the findings of The Presidio Group LLC’s latest quarterly publication focused exclusively on automotive retail performance, technology and M&A trends.

The latest edition of “Presidio Perspectives: A Quarterly Outlook on Auto Retail and M&A Trends” sums up the industry’s performance in the second quarter of 2024 and provides a glimpse into the ongoing normalization in the industry.

The report is the fourth release by The Presidio Group, an independent merchant banking firm focused on mergers and acquisitions, capital raising and investments in the automotive retail and consumer mobility sectors.

Net pretax profit for the average franchised store slid 33.4 percent through 2024’s first half compared with the same period in 2023, according to the Presidio-NCM Average Dealership Performance Benchmark. That was just 1 percentage point more than the profit decline for the first quarter of this year.

Presidio-NCM benchmark data shows that many dealers may not have acted quickly enough to rein in expenses that rose during the profit boom. The average dealership has seen variable gross profit plunge 32 percent since 2022, but total personnel expense has dropped by just 6 percent during the same period.

The slowdown in the earnings falloff is a positive signal, but it varies greatly by brand and geography. And even if the profit decline stabilizes, the coast isn’t clear.

Said George Karolis, president of The Presidio Group: “We’re surprised that the typical dealership hasn’t adjusted its spending and variable costs as quickly and appropriately as it should have given the decline in profitability over the last two years. This is a time when dealers must be nimble and adjust quickly to the industry’s changing circumstances, and many of them have not.”

Among other highlights in this report:

  • While profitability for the typical franchised dealership continues to be well above the norms seen before the onset of the coronavirus pandemic in 2020, it has declined by roughly 50 percent from its peak in 2021.
  • Dealerships representing certain brands continue to operate at an elevated level, while more-challenged brands have seen dealership performance revert to levels closer to their historical norms. We offer more detailed insight on certain brands in our M&A section.
  • Presidio’s mid-year Dealer Direction Survey showed that while dealers continue to expect profits and dealership valuations to moderate, they are interested in buying stores and expanding their networks. Toyota and Lexus continue to lead the pack on brand strength and valuation, BMW and Mazda are trending favorably, and Subaru continues to balance supply and retain a loyal customer base. We see positive momentum for those brands in the dealership M&A market.
  • Nearly 60 percent of dealers responding to that survey said this year’s U.S. presidential election will affect the business of auto retailing; most are braced for a negative or mixed impact.

Presidio’s fourth report also offers a robust look at the profitability and performance of public dealership groups; M&A trends including transaction pace and outlook; and auto retail technology trends. 

To download the report or register for future publications, go to: https://thepresidiogroup.com/news-insights/#quarterly-report

About The Presidio Group LLC 

The Presidio Group was founded in 1998 with the simple mission to relentlessly put the interests of our clients first. By steadfastly adhering to this philosophy, the firm has earned the trust of clients throughout the United States. During their careers, the professionals at Presidio have collectively done more than 275 transactions for more than $18.5 billion. The Presidio Group, based in Denver and Atlanta, publishes Presidio Perspectives: A Quarterly Outlook on Auto Retail and M&A Trends, a leading source of information about the automotive retail landscape. Presidio Merchant Partners LLC is a subsidiary of The Presidio Group LLC and is a member of FINRA and SIPC. For more information on Presidio, visit www.thepresidiogroup.com.

Contacts

Brodie Cobb
(720) 844-3151 
bcobb@thepresidiogroup.com

George Karolis
(678) 831-5520
gkarolis@thepresidiogroup.com