Penske Closes the Gap with AutoNation

The Penske Automotive Group is catching up to AutoNation in the total revenue department. A few years ago, AutoNation was generating about $20 billion in annual revenue, while Penske was at about $8 billion.

Penske has narrowed the gap considerably generating $10.6 billion last year to AutoNation's $12.4 billion ($12.5 if you round up). And now Penske has added about $257 million worth of revenue with today's acquisition of Crevier BMW in Santa Ana, CA. Crevier is the fifth best selling BMW dealership in the country with more than 5,200 sales in 2010.

Meanwhile, the dealership acquisition market is heating up this year as chatter on the street indicates there are quite a few discussions going on. Expect a few more big deals to be completed by the end of the year. Buyers have access to capital again while other dealers are getting older and looking for an exit. Or the founding dealer has recently passed away and the family may decide it more prudent to take the cash instead of staying in the business.

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Comment by Kevin "Friend Me" Bradberry on July 16, 2011 at 6:40am: Good Stuff Cliff!

Comment by Cliff Banks on July 14, 2011 at 8:24pm: Thanks Bobby!

John, I don't know if the Wal-Mart/Home Depot analogy works in the case of the public groups. Certainly AN has had to find its way on whether to build a national brand or create strong local brands in each market. The latter being the strategy they've settled on.

It will certainly be more difficult for the single point dealerships to survive long term as the bigger players are becoming more efficient and have more financial resources to invest in proper technology, people and facilities.

Comment by Cliff Banks on July 14, 2011 at 10:52am: The interesting part of this -- which I should have included in the post had I the time to research it -- is that AutoNation's stock price the last 12 months has jumped from $19 to $39. That's a $20 increase. On it's $12 billion of revenue in 2010, it created a healthy $2.13 billion in profit.

Penske's stock price has gone up about $11 -- from $12 to $23 in the same period. It's profit was $1.7 billion in 2010.

Despite the revenue decrease for AN, investors sure like the stock. AN's revenue drop mostly is due to closing poor performing dealerships -- many of which they accumulated during its buying spree several years ago. AN has reduced its dealership count by more than 100 since its peak of having 273 stores around 2005 - 2007.

Penske, meanwhile, has been buying up several luxury dealerships -- including stores in Europe.