Q1 2020 Earnings Call
Good afternoon, ladies and gentlemen, welcome to the Penske Automotive group first quarter 2020 earnings Conference call. Today's call is being recorded and will be available for replay approximately one hour. After completion through may 13th it's all the company's website under the investors tab at W.
Www Penske automotive dotcom I will now introduce Anthony important the company's executive Vice President Investor Relations and corporate development. Sir. Please go ahead.
Thank you Jon good afternoon, everyone and again, thank you for joining US today, a press release detailing Penske automotive group's first quarter 2020 financial results was issued this morning and is posted on our website along with the first quarter earnings presentation designed to assist you in understanding the first quarter and our results as.
Always I'm available by email or phone for any follow up questions. You may have joining me for today's calls Roger Penske, Our chairman GT Carlson, the Chief Financial Officer, and Shelley Hulgrave, our corporate controller.
Our discussion today may include some forward looking statements about future events, including the impact links and financial expense expectations related to covert 19.
Also we may make forward looking statements about our operations earnings potential and outlook I'm a call today.
We may also discuss certain non-GAAP financial measures such as earnings before interest taxes, depreciation and amortization, our EBITDA and free cash flow with prominent we presented the comparable GAAP measures and have reconciled the non-GAAP measures in this mornings press release and Investor presentation, which is available on our website to the most <unk>.
Directly comparable GAAP measures our actual results may vary because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations I direct you to our SEC filings, including our form 10-K for additional discussion in factors that could cause results to differ materially.
At this time I'll now turn the call over to Roger Penske.
Thank you Tony Good afternoon, everyone and thank you for joining us.
Today before discussing our first quarter performance I would like to make a few comments about cobot 19.
Yes, it's been an extremely challenging time for all of us and our thoughts or will those most affected.
Our first priority is to provide safe environment for all our employees and customers we have quickly implemented enhance cleaning protocols.
For social distancing and taking other actions to protect our employees and our customers.
I'm proud of how our team has responded.
The cobot outbreak across the world has adversely impacted the global economy.
I was a significant disruption to our business in March it began to impact all our markets.
Many of our U.S. in Germany dealerships face shelter in place orders.
Well operations in Italy.
Spain and the UK were close as a result, our overall same store automotive retail unit sales for the month declined.
40%.
And the last half of March and all of April our automotive dealership sales and service operations were limited due to related restriction.
In response, we implemented a hiring freeze initiated expense reduction in deferred approximately 150 million.
Capital expenditures.
We also furloughed approximately 15000, representing 57% of our worldwide workforce and initiated pay cuts for executives.
We believe these actions will help us overcome the challenges of.
Colin 19 pandemic, we will continue to act actively monitor the situation.
Just our business model to adapt to the changes pretty started by cobot 19.
In the quarter, we focused on liquidity and preserving cash.
During the first quarter, we generated 212 million of cash flow provided by operating activities.
And 145 million a free cash flow and reflects a 30 million decrease in capex compared to the first quarter of last year.
As of March 31st 2020, wed access to 1.3 billion and liquidity, including 432 million of cash.
450 man of availability through revolving credit facilities, and access to 450 million and potentially Financeable real estate.
We have 2.6 billion a non vehicle debt.
Net debt to total capitalization was 44.7%.
Compared to 46%.
At December 31st.
Net non vehicle debt to EBITDA was 2.9 times.
Looking at the P.G. balance sheet at the end of March the ballot sure. It remains in good shape.
Total inventory is 4.3 billion, which is flat compared to December 31st last year.
Our floor plan were 3.9 billion, we have approximately 350 million and vehicle equity out our balance sheet.
Let me now turn to the details of the first quarter of 20 Twond.
And the U.S. during January and February same store, new and used unit sales increased.
7.5%.
I will internationally same store unit sales declined 1.1%.
During the call were 19 in March total same store total unit volume declined 40%, while fixed operations declined 23%.
As a result, and the entire first quarter, our revenues were down 10% to 5 billion.
Income from continuing operations was 52 million and earnings per share.
64 cents.
Our income was impacted by the closure of all dealerships in the UK starting on March 20, Fourq as you know marches or registration month in the UK and is typically the largest sales from up to the year.
During a registration month, we would normally deliver 30% of our new unused volume during the last week.
Nearly 5000 units, which represented approximately 13 million a gross went on delivered.
We also could not deliver another potential 2000 units, representing two and half million gross and our used car supercenters.
Income was also impacted by a decline in U.S commercial truck gross profit.
From pressures on value due to the changing market conditions.
Looking at the details our retail automotive same start units declined 15%.
In the U.S. January and February we were up 8%.
International was down one in March and the U.S., we were down 41%.
And international was down 39.
Same store gross profit per unit retail perform well no vehicle $3211 flat with last year.
As vehicle side were 1300, $75 up $48 or 4%.
Our finance and insurance was 1300, $63 up 6% or $87 per unit.
Variable gross profit per unit was $3493 up $86 or 2%.
Our service and parts revenue declined 6%.
Thanks.
We were down 4.4%.
And customer pay down, 10.2% and warranty and our collision was up 1.4.
We also had at our same store a warranty decline in our <unk> and international markets or 16%.
Moving onto our used vehicle supercenter businesses. The 16 Supercenter location is closed in March I remain closed through the majority of April during the quarter revenue declined 3% the 305 million.
Same store unit sales increased 2% in February.
But declined 49% in March including 56% in the U.S.
And 47% and the UK.
Our average transaction price and our Super centers increased 4%.
The $15158.
And the variable gross profit was 1000.
$953 down 2%.
As we look at expansion, we had opened two locations in 2019.
Turning to us and one in the UK, both had successful openings and outperform our initial expectations.
Today, we have four sites under development, but due to the pandemic, we shape construction and move the completion of these sites out to 2021.
Moving onto our digital initiatives the performance of dock your pads exceeding our expectations.
With enhanced training at a focus on improving product penetration if an eye per unit in the U.S. increased $93 or 7%.
Our digital initiatives continue to grow online sales.
Today, we have over 56000 vehicles online through our digital channels in Q1.
Under 50% of our sales in the U.S. were attributed to our digital efforts Offsite deliveries are increasing with many dealerships reporting over 20% during this period.
Our preferred purchase engagement increased more than 50% in April when compared to last year, while several several lender partners made policy changes to allow digital signing remote identification verification.
And he contracting.
We enhance Penske car dotcom and car sets websites to provide an enhanced digital experience, including updating technology to encourage more online vehicle transactions.
Let me turn now to our retail commercial truck dealership business.
Experienced steady demand during the quarter retailing over 3500 trucks and generating almost 500 million and revenue with a return on sales of 3%.
No unit sales increased 49%, while same store unit sales all the declined 2%.
Which when compared to the overall, north American market, which was down 26% and the first quarter.
Same store service and parts revenue declined 6%.
But our fixed absorption was 125%.
Turning to Penske transportation solutions in Q1, PGS generated 2.2 billion in total revenue and had income of 47 million.
Retail Pts and net income declined 42 million in the quarter.
From a 20 million reduction out and gain on sales of U.S revenue equipment due to market conditions.
11% decline and rental from lower utilization.
And the benefit Pts had last year from a legal settlement of 11 million as a result, our equity earnings were 13.6 million.
Prior to 25.8.
In Q auto last year.
In closing our team around the globe is working tirelessly I'm encouraged by the many positive action taken by our team to address the changing marketplace. Our digital initiatives continue to grow our online sales further we've adapted sales processes to facilitate a greater ecommerce focus curbside or.
Home delivery pickup and drop off for our service customers and really very remote finite process through dock you pass.
As a result, we've seen businesses improved from week to week as we believe customers should become more comfortable with buying vehicles under the current conditions. In fact unit sales were up 40% in the us in the last 10 days of April when compared to the last 10 days of March.
We believe that many access taken will help us overcome the challenges of coal that 19.
Thanks for joining us on the call today and for your confidence in our company. This time on open up for the operator for your question.
Thank you and ladies and gentlemen, if you would like to ask a question on the call. Please press one than zero and operating will come on the line briefly together your name and affiliation.
If your question does get answers you wish to remove yourself from the Q. Please press one zero again.
And at this point that once again, please press one general PM question.
Amis Penske, just one moment, where we get the first questioner.
Thank you.
And well below the line of Michael Ward with benchmark. Please go ahead.
Thanks, pulling the trigger sorry.
Thanks Roger.
Okay.
Couple of questions on the UK.
<unk> was the parts and service shutdown throughout March and April as well. So what does the status of that and then the second thing is.
Did you have 5000 units on your lots ready to be delivered or were you still waiting delivery from manufacturers and if you were still waiting on deliveries are there additional units that are contracted to be delivered.
Well, let me answer that question as you know in the UK most of the new inventory as Stuart.
On the OEM premises, but they would they are sold units and will be brought into the dealerships.
On a PD Ivan delivered to the customers some of the huge units, obviously would be on site and we have the normal.
Pipeline thats coming in but thats not very strong as we look at the current current situation.
From the standpoint.
Of the business from a service perspective, we were close and when you look at the UK registrations that came out yesterday the market was down 97%. We had a few of our we had a few of our locations opened for service, but mainly on an emergency.
An emergency basis from the standpoint of service as we look at the business today with roughly 9700 people in our UK, we had 90% of them on furlough for most of the period.
Just a pandemic started and we're putting back 300. This week the start up our parts and service business hopefully.
On March are certainly on May 11, I will add another 300 to the next 10 days and another 300 at the towards the end of the month and that would be based on the government opening up the ability for us to deliver cars from our sales locations.
Okay. So as we look at the UK market.
Typically you get those this blip in March and then September will some of those be pushed as far back to September will they just kind of come trickling out over the next few months as it opens up.
Well I can tell you that our guys are motivated to movies as fast as they can this is a.
Thats a six months different end you have a different cycle.
Trades and people it would be ready to some of these are company cars, which would then cycle in the.
Delivery sector that we'd have.
In the March at the end of March. So these cars are sold there on the ground in the UK and will be delivered as we look at it and when you look at it in total.
We have the ability to deliver and there's probably I think I mentioned before $13 million gross profit as this tied up on these vehicles being on the ground that we didnt deliver in the.
In the month to March and when you just take the months a March.
By itself just to put it in perspective.
We had 7000 vehicles that we didnt deliver on a same store basis in the month to March in the UK, which.
Was 20 million less.
Vehicle gross profit.
And we had 6 million less in parts and service and our bottom line was 20 million.
Pounds less in March of this year versus last year, just to put it in perspective, the impact of that coal would situation in the last.
Roughly 10 days of the money.
Hello.
Thank you Roger Thanks, Mike.
Next we'll go to John Murphy with Bank of America Merrill Lynch. Please go ahead.
Hi, good afternoon Roger.
Just wanted to ask a first question. If you think about the cost saves that you're implementing.
At the moment.
How much of this do you think is going to be sticky on the other side of the crisis.
And similarly is there any business practices or things you're learning as you as you're going through this crisis that you think might help the business.
On the other side.
Well I think that we're looking at it in a number of different ways and not to break it out from the standpoint, a compensation or certain fixed pieces, but I think there's $75 million to $100 million worth and cost saves that we'll have as we come out of this which would be on an annualized basis I know.
Thats a rounding number at this point, but I can tell you we're focused on it and probably currently in the next couple of months, we'd probably see at least eight to 9 million a month coming out based on things that have taken place some of thats due to interest saved on floor plan part of that might be mark.
Getting an advertising expenses other costs, we've taken out demos vehicle maintenance and things like that which will obviously some of that will come back loaner cars. Obviously is a big expenses. We don't have I'm just counting on a few on the come to mind right now, but we would expect that to continue in many of those cases, but overall.
I think there's 75 to 100 million that's our minimum goal that we would take out on a global basis. It would continue on on an annual basis. Once we get through maybe as we get into the third quarter.
But that's very helpful. And then second question.
And this seems a little lot as at the moment because inventory.
Currently isn't too low because not a lot of sales going on but I'm. Just curious if we go through the month of May and even June where production is not ramped up fully.
Yet there is some level of sales I'm going to what we saw here on the U.S. go on in April and inventories going to get pretty pretty darn tight.
Im just curious how you're you're.
Managing that thinking about that we would not getting a lot of deliveries.
Your dealerships.
In the context of managing the inventory, but also in the context of Gpus.
Appear to be fairly resolute and resilient I should say for both you and the industry.
Well look and not number one what let's talk about our inventory right now if you go back.
Till the end of March our new car inventory on a global basis is down 100 million and our used inventory is also down 100 sense.
The end of end of March now, probably only down 100, if you look at 331.
We obviously when you look at our used inventory, we've got 11% of our inventory over 90 days and we've got 25% our inventory.
New vehicles over 120, now that was exacerbated because we didnt know business. When you think about the month of April but I think we're going to have a could have a big issue on incoming inventory from all the manufacturer as you've seen the German manufacturer, starting and stopping from a standpoint of of new production I know from Daimler.
Perspective in Mexico, they pushed off heavy duty trucks by two months. It is not the fact that they don't want to open or not meeting the protocols and the plan is the fact that the supplier base.
They all days maybe back in eight nine.
These Oems are more vertical from the standpoint of of the supply of their parts to their vehicles will that's not the case today. So they have to rely on many many suppliers I think thats going to be key the only good news out of that is when they do go back they're going to build the cars, we want the ones that they make most the money on the movies and unless the whole.
Marketplaces change socially because of maybe over and lift and things like that won't be.
First choice, we will be looking for some type of transportation. They might go back to the smaller sedans, but I think we've got to watch inventory and for sure we're going to watch our gross profit and I think that to me thats.
Thats going to be key on the other hand, if you're sitting here today and want to buy a car.
To me the zero for 60, 72, or 84 months is there extending lease payments all the things that the Oems are doing to try to attract new customers and there's no question that all these things will emerge at some point, but.
Your question on inventory I know I gave you a long answer I think it's something we got to watch both domestically and internationally.
That's incredibly helpful. And then just maybe lastly on parking service.
I mean, there's going to be some pent up demand you on deferred maintenance. It gets released that to some degree as we get out of this nets.
But also.
Does seem like there may be an opportunity for you to attract some some talent on the technician side to bolster your your main capacity. If you will how do you think about that and I know you've got done a lot of work on on training is there may be the opportunity even the training. Some of your folks that are on furlough that might not be hired back is.
You know different kinds of workers that may come back is tax or is there a broader opportunity. The economy now more folks out of work for you to get them trained and and really take advantage of its parts and service work it's out there beyond.
This crisis.
Well I think I think really what weve, what we've done in the past we bring in apprentices. Many many students from Yutai, which.
Obviously, they've gone through good training and we would expect that we could extend that through our own training working side by side with a and B mechanics, but remember what we have to do today is we have to balance our manpower match, our manpower with our demand whether it's on the sales side or parts and service.
Seeing through our BDC centers, both internationally, specifically in the UK that we're making a lot of appointments for people to come back. So there will be a surge I'm not sure as an initial served people have been driving in their car, but what will happen as we come out of this and maybe 60 to 90 days, so I want to be careful that.
Don't add people back but in the meantime.
We can offer to our people to have additional training and I think to some of that it might not be available now unless we did it in house and I think quite honestly I don't think we have a program set up specifically the start that today because the main thing were doing is trying to get ready to move service into gear in fact in the.
Okay, I think I mentioned before it we have 300 people just back in the UK in our shops number one to clean them properly to meet the specification as required by the government number two to recalibrate our machines as we go back so that's where we're spending our time with people that are.
On.
That are back to work and not not on lay off at this point. So again the last couple of weeks, we've seen sequential increases here in the U.S., So about 9% per week increase in our parts and service business.
Great. Thank you very much of the color.
Thanks, John.
Our next questions from Rick Nelson with Stephens. Please go ahead.
Thanks, Good afternoon, Roger Tony.
Correct.
Quick question.
You are about.
Online.
Total continues to grow.
How do you see the profitability there compared to an in store transaction.
Yeah, similar up from our current per unit.
What is your envision overtime.
Okay, great a lower cost.
On a transaction.
Well it depends on if we're going to have remote sales people in the future that would be a new model. Obviously, everybody has been operating remote some people light rather work from home, we'll find out as we bring people back but as we've looked at our grosses you know that we've been able to sell I know in the UK, we've looked at over 20.
500 transaction as the grosses are in line with.
The current say January February numbers, and we see the same thing in the in the U.S. and what we have done is taken.
Our document pad with the usage zoom and we're actually going through the customer through zoo and able to sell the back end products quite profitably. So we see probably more interest in our salespeople, they're getting more comfortable using these tools rather than just a face to face in the dealerships. So I think overall.
We see an increase and have fun I and I think probably from a front end perspective, there's so much action right now from the Oems, It's probably hard to know what we'll get in bonuses in order to see what the all in gross profit is but I think the process is good I think the customer is coming in but more information gassy spending.
Our time online and when we have to do is as make the time to market to deliver this car we need to take that cycle time down which got to be able to do with the current technology and I think from docket pad. This meda tremendous impact on us.
From the standpoint, we've put data across our entire enterprise here in the us.
Home delivery.
Sure Matt.
Hi, growing part of your business.
Customers prefer.
That the home delivery to curbside pickup criminals store.
Well look I think right now with the social distance, saying at all of the mandates coming federally statewide locally people I think are confused to a certain extent, we're going to go to restaurants now how are we going to sit what are you got to do in movie theaters, but right now we're using it as a tool obviously.
Until these markets open up we always quite on the premium side I think we've always offer pickup and delivery of service cars and certainly the same thing from the standpoint of new vehicle, but there still will be a connection I think with the dealership.
From a franchise perspective due to identification due to other what signatures that are needed.
In the future. The other thing is that the protocol that we've established using a partner we have obviously a safety claim that we use on the race games, they really come to the party with us or across the country and we really have a process. We've had some positive cases in the service.
Harvests in some of our locations, we shut them down immediately and within 24 hours.
Safety Creek comes in so we can we can give the customer some sets of comfort that we are addressing the protocol and thats, what we would expect to do and we all obviously, whether we're delivering at home or not we sanitize the vehicles.
Hi.
Hey.
Thanks, a lot and good luck. Thanks, Thanks, Rick.
Our next questions from Stephanie Benjamin with Suntrust. Please go ahead.
Hi, good afternoon everybody.
I was hoping Roger Downey I was hoping.
You guys could just touch on the and improvement that you saw and just gross profit per unit really across both new and used in the quarter. Despite the decline and that revenue in March. So maybe just you can speak to what initiatives were put in place to drive such a year over year improvement.
Well I think it's been a constant focus not on volume and remember we're in the premium luxury side a lot of these are leases, probably 50% to 55% of our businesses leases on the luxury side and from a a percent, whereas we were at 7.7% last year on our gross margin on new we went to seven point.
Five not a big reduction we kept our volume foreign flat and obviously domestic went up so to me.
With the U.S moving up I think it's a focus and having the right inventory and everybody is looking at day supply and I think that.
Our reduction in inventory when you look at it from the standpoint of used we're not in a position. We're just wholesaling at the retail level.
Got it and then just sticking on the use that.
Standalone store.
And the year really opinion in terms of saying, though.
Demand returns from.
Stores.
A lot of government start back up in areas. So could you speak to the demanding prior jacoby. It and then as you certainly about what you think those stores.
Really start to see an improvement when the stores open.
Let me just position.
Our.
Supercenters.
In the UK they've been shut down.
Since the last 10 days of March they are still not open and from a US perspective. They have been closed from the 20 Onest of March and they're just we just opened one store just to deliver cars in Pennsylvania, So anything we've done since.
Everywhere he really has been.
Under some duress, but when you look at.
February quarter to date, we were up 19% on a same store, we were up 4% and internationally, we were up nine and on a same on a same store basis.
We were up 2% so.
The good news is when we see a total we were up because we both of the new stores, we won in Bristol, England, the other and going to Hills, Glenn Mills, Pennsylvania, both had good openings and there was a lot of interest. So we see that is all of our peers do use being a real focus we don't have the capex to worry about.
And when I talk about Capex.
Just as a data point I look at that in the future, we're expecting to reduce capex by 150 million Thirtya, but came out already.
We're going to work with the Oems, what I call reduce the cosmetic.
Capex, so let's look at the operating Capex electrification or something like that so we feel in the used car side. The super centers that that number is considerably less but I think demand is there I think the fact that we might see people getting out of.
Third party chauffeur cars.
Over lift do we see them buying lower priced use which would fall right into our supercenter.
Vehicles that were selling somewhere between 15 and 20000 MSRP.
Got it thanks, so much.
Thank you.
And next we'll go to line of I meant just thinking about just with Morgan Stanley. Please go ahead.
Great. Thank you hey, Thank you. Thank you for taking the question.
I was hoping you know we've spent a lot of time talking about March and April and I know, we're just in the early days here may but maybe you could talk about the trends you're seeing in May and where you expect over the next week or two im sure theres not much visibility beyond that but you could speak to sort of the current trends as you bring particularly as you bring it back.
Employees in the UK that would be helpful.
I was hoping you are going to answer asset question I'm, just getting if no ill on a serious note.
We look at at April I'm talking about to us.
We were down 53% on new and through yesterday.
We were down 28.5%.
On the U.S side, we were down 42% in April and were down 17.7% through yesterday on use NFC and tire use of course, we're not open in the UK. So really there is no number to talk to you. There. So that gives you some idea what the market is doing and obviously, we're putting tech technicians.
Back in we're going to put about 500 people back in the us and the majority of those would be on the parts and service side was was certainly aligning the demand on sales with a number of salespeople, we bring back and still keep some people obviously on the role working from home.
Okay, and then I was hoping you could talk a little bit more about Penske truck leasing that was down year over year last year. There is some some onetime gain on sales and theres some mix dynamic taking place in that business with deliveries up these days, but.
Other parts of the business down a bit if you could speak to that that would be helpful. As well just how we should be thinking about that business going forward as well.
Well I think for the first three months I think we reported.
We were up 2.8% revenue to 2.2 billion in all product lines, obviously, we're active.
First let me talk about you talked about.
Used truck pricing.
When you think about do you all right.
Hi, Penske truck leasing Nada and all the microphone.
No I was just kind of talk about used trucks, how it impacted got it struck me getting from a from a gain on sale, we were down $20 million on gain on sale.
For the for the quarter and the majority of that really is impacted because what happened to the market. The overall heavy duty market was a banner year last year, one of the largest over 300000, well that pushed a number of used trucks into the first quarter from a use per se perspective, which drove values.
Down from four to 6000 on tractors, then with a pandemic that came out there really wasn't any wholesale market. So with a number of vehicles. We have we got to continue.
Divest of the off lease vehicles or rental vehicles, and therefore, we had $20 million less and gain we had a good gain but $20 million less for the quarter, but also on the rental side, we had reduced our rental fleet.
By about 6000 units. So if you go back a year and of course with a lower rental fleet is generated less rental revenue and when you look at our business the rental side, we call it lease extra as most of our lease customers don't police the maximum number of units that they need they'll do a minimum and then we offer.
Lease extra at a reduced price with business being down here for the last four to six weeks lets say all of those lease extras have come back. So we have those at our fleet. So that's that's reduced revenue say that lower usage.
Truck prices lower rental revenue.
Obviously, and then we had the gain of 11 million that was part of a pension.
Issue that we solved from a legal standpoint, and we picked up $11 million last year, which we reported.
During the quarter last year.
Right.
Great I appreciate that the the taking the questions.
Sure.
And before we go under our next question just a quick reminder, if you do have a question. Please press one zero and done we'll know tumors yacht group with JP Morgan. Please go ahead.
Hey, good afternoon, Roger Thanks, Thanks for thanks for taking the questions.
Oh, just wanted to get a sense about the online transaction that you talked about.
A large portion of the sales.
We've done because it's a digital efforts should be.
How do you think this impacts.
The trading and we'd like it to fewer.
Delaying.
The way goes online.
Through home delivery.
And what kind of impact are you seeing in the treatment because lot of these transactions and typically shade, and then traded and with the U.S Waco, and then related to the.
What kind of impact are you seeing on the aftermarket so from the online transaction and a follow up.
Let me, let me talk about the the online transactions from the back end I think thats exactly what I tried to cover earlier with the use of document pad and zoom, we've been able to connect those with the customer remotely and be able to go to the same process that we would do sitting.
Cross from each other to sales at the sales there. So that's been very very helpful. And fact from a pro and overall standpoint, I think that we've been we've been in good shape from the standpoint of trades, obviously, when you're doing an online transaction the customer on his own has the opportunity to look at what is.
Trade value is and then there is some negotiation on line with our consultant and the customer but in the meantime, we would pick up the trade when we delivered if it was I was a delivery we made directly to the home or business, we would pick up the trade at that point and bring it back.
To our location so that would be normal anyhow as I said earlier, we've done.
Home delivery many times over the past years, I think it's accelerated a little bit right now not a little bit probably because everybody sitting at home. There's no question that.
Well were up.
Overall, but I think we'll make to go back probably to a more level pace. There. The one good thing that's happened I think all of our sales associates and consultants are now much more comfortable using the online tools, we've seen more traffic on preferred purchase.
And our case.
Penske cars dotcom and all of these I think are going to help us be better and also takes some cost side of the sales process along with cycle time for the customer and I don't think we lose one penny a gross profit by doing business online.
Got it.
Thats Super helpful and then a follow up.
Just wanted to.
Got your views on industry consolidation.
Do you view.
This space you know post post close this crisis I mean, do you expect consolidation to pick up.
Some of the independents on the you side.
Slide to talk to invest in the digital capabilities and you don't compete in online omni channel.
Thanks.
Well, let me to say that.
We certainly as a company are learning every day, but we don't know about omni channel and how we can take care of the customer on the U.S side. There's no question and we certainly have some late horses out there that are theyre doing that obviously many of these products that we have that are customize it we do our sales.
People like Coxon and other people are going to have products are going to be available to all dealerships from an OEM perspective, whether available obviously for used car dealerships I don't know, but typically small used car operators are under real pressure. They don't have that they don't have the OEM captives support on used car financing.
For the customers and I see some of that will just probably they will go a lot of business and we'll pick that up individually or collectively around the around the country, but from a consolidation basis of the industry and I'm thinking.
More of dealerships it would be available when you go back to the crisis financial crisis.
That time.
Oh Am's, we're in a FIS fight with them day, one to reduce the number of dealers you remember there were lawsuits general motors, and Chrysler et cetera, and at this point to the Oems are being so supportive show us really to dynamics are entirely different on top of that at that point, we had the parts and service opened but I think we're going to be opportunistic.
We're certainly not going to go into a marker. We don't have scale I don't know what our peers will be doing but I think they're probably think the same way on the other hand, we were able to by the two Lexus businesses in Austin, Texas. If they came up again, we'd probably move quickly on that so I think it's going to be.
Brand by brand, where you have your strengths and also we have scale, where you can consolidate some of the fixed costs, but I think it's too too soon to look at that.
There has been some big deals out there that have not been completed but that doesn't mean they weren't good deals at the time. So we certainly are looking at our capital allocation. You know we can look at certainly whatever capex. We have we got in our dividends, we got our stock buyback and these are things that we got to look at that and what do we want to use for.
For our acquisitions and we would focus today, probably investing in the used car business from the superstore perspective, and also look at expanding our footprint.
On the commercial truck side.
Got it just one last one for me just a follow up on an earlier question.
On the cost saves.
On the Barlow actions could you help quantify what.
The savings just from a formal actions.
You mentioned 89 million.
Bottom line, but I think those were like outside outside the headcount reduction, but we'd be able to give us a sense of justine headcount related cost stage near term.
I don't know that us near term I think what we have to do as I understand what will be the footprint of our business how much will be digital how much will be done from home how many people we have actually working.
In the operations and any of this compensation will have we looked at based on the model what I do think as we look at the overall cost saves if I look at the next 12 months annually our sequentially by month I think that we can get somewhere between 75, and a 100 million out.
Completely now again.
No. We don't have a lot of data on that but as we see the number of people, we have furloughed and as a business all going to be decided by health business comes back I can assure you weakens are concerned about our people and in many cases here in the US we've provided extra support on the healthcare side. So on.
Benefits and we'll continue to do that where possible.
Understood. Thanks, so much and good luck.
Thank you.
And Mr. Penske no further questions in queue.
All right John Thank you and thanks, everyone for joining the call we'll see you next quarter.
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