Penske Automotive Group (NYSE:PAG) has seen its diverse selling model tested in recent quarters, as new-car sales volumes drifted lower to overwhelm gains in the services segment and a booming commercial truck business. The auto retailer recently revealed continued strength in those growing division for the second quarter. However, these improvements were more than offset by struggles elsewhere in Penske's portfolio.

Here's how the headline results compare with the prior-year period:


Q2 2019

Q2 2018



$5.8 billion

$5.9 billion


Net income

$119 million

$135 million






Data source: Penske Automotive Group. 

What happened this quarter?

Sales declines spanned both the used and new segments of the business. Demand challenges were limited to the U.K. market, though, which is shrinking as a consequence of Brexit disruptions.  

A customer shops for a new car.

Image source: Getty Images.

A few highlights of the quarter: 

  • Sales volumes worsened for the third straight quarter, with new-car sales dropping 9% and used-car sales slipping by about 1%. Executives had hinted at a potential rebound in the new-car segment back in May. But a sharp drop in demand in the U.K. stalled recovery ambitions.
  • Same-store sales declined 2%, a bit worse than the prior quarter's 1% drop.
  • Profitability held steady as higher new-car profits and increased financing earnings offset weakness in the used-car segment.
  • The commercial truck business continued expanding at a healthy clip, with same-store sales up 26%.
  • Penske expanded the truck business by the acquisition of Warner Truck Centers, adding six dealership locations to its truck retailing network.

What management had to say

"Our U.S. retail automotive, North American commercial truck dealership business, and investment in Penske Truck Leasing each performed very well," board Chairman Roger Penske said in a press release. "However, weak market conditions in the U.K. from Brexit ... impacted second-quarter results." Management estimated that the wider new-car market in the U.K. dropped 7%, which "significantly impacted our results."

Looking forward 

Given the weak outlook for the U.K., Penske appears on track to post at least a slight sales decline this year versus the 3% increase it logged in 2018. Cost cuts are helping protect profits, but not by much. After all, operating earnings are down 9% over the first half of the year, compared with a 3% decrease in reported sales.

The chain's recent acquisitions demonstrate that management is determined to continue investing in attractive areas like truck leasing and sales, services and support, and used-car sales. These initiatives likely won't be enough to offset tough selling conditions in places like the U.K. and Australia this year. Penske is hoping the moves set the company up for a strong 2020, though, and investors will get a better idea of that prospect by following overall revenue and profit results over the next few quarters.  

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