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WardsAuto MegaDealer 100 – Numbers Go Up and Up

By Phil Villegas

As seen on WardsAuto

In 1994, when WardsAuto began its list of 100 megadealers, it was a compilation of super-regional groups. The largest then was Hendrick Automotive, with 66 stores and $1.8 billion in revenue.

On the 2018 WardsAuto Megadealer 100, $1.8 billion alone won’t get you in the Top 25. (Hendrick is No.6 this year with total revenues of $8.6 billion. No.1 AutoNation took in $21.5 billion.) For the complete list, click here.

Unlike in 1994, when there were no public dealership groups yet, today’s compilation of megadealer owners includes publicly traded companies and private-equity firms.

The functioning dynamics and playing field of the Mega 100 has changed drastically from the inception of the list. It used to represent a reflection of top dealer groups that expanded based on reinvesting their capital into additional operations as a reflection of the performance.

I would argue the challenges of building and maintaining a megadealer group in 1994 can exceed those of our current market, where access to capital is readily available and obtaining factory approval isn’t the challenge it once was. When AutoNation was formed in 1996, it faced resistance from automakers who didn’t like the idea of consolidating dealership power under one corporate roof.

Today, private equity funding can have an immediate impact on the list, helping dealers suddenly appear, or in the case of Van Tuyl, taking a group completely off the list. Van Tuyl for years was high on the list. Then it was sold to Berkshire Hathaway, a company that declines to share dealership data.

That brings us to a point of clarification. Like another industry megadealer compilation that came later, the WardsAuto Megadealer 100 ranking predominantly is based on voluntary reporting and the honor system. We don’t audit the numbers, nor do we subpoena companies in an effort to force them to be on the list.

For whatever reason, some dealership groups who would have made the list aren’t on it because they didn’t submit numbers. Still, the ones that are make up an impressive roster.

As someone involved in dealership buy-sells, I’ve been fortunate to work for both a single-point dealer and the largest dealer group in the world.

I’ve had the privilege of meeting and consulting with some of the best dealers in the industry. Throughout this journey, I’ve learned quite a bit.

But there’s one thing that I learned on my first day on the job which still rings true today: There’s one key metric to evaluate the performance of every dealership. It is profitability, plain and simple.

The bottom line is the universally accepted indicator of how well a dealership is performing. This is the only number that any of us should be interested in. There’s nothing wrong with this. Profit, whether net or gross, is not a dirty word.

While we may get caught up in the world of sales, volume, market share, proficiency, occupancy, ROI and absorption all are derivatives of profit. In short, cash is king.

If I’m allowed to dream for a moment, I would create the mega 100 net-to-sales leaders that ranks by the highest percentage of net profit as a percentage of total sales.

To be clear, I’m not implying profitability at any cost or impact, but rather a fair profitability by which you can sustain business, retain employees and delight customers.

Chasing revenues alone does not guarantee profitability. Let’s remind ourselves of a once-perennial top-10 dealer group, Bill Heard Enterprises. At one point, it was the No.1 Chevrolet dealer in the country.

Here was a dealer group that was founded in 1919. In its early day, it sold the brands LaSalle, Essex and Hudson in Columbus, OH.

It boomed in the 1990s with a high volume/low margin philosophy, something that used to please a manufacturer. Ultimately, however, this proved to be an unsustainable formula. The Heard megadealer group went bankrupt when the recession hit a decade ago.

 

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