DealerLAB: Bad weather, new location cause a stumble

PUNTA GORDA, Fla. — Bill Shenk’s Destination Powersports finished the year ended Dec. 31 on a flat note, but overall the dealership posted a strong performance for 2013, with earnings up 76.5 percent over 2012.A big part of the year-end decline was caused by the dealership’s move to a new, location several blocks away from the old store. The business was run from two locations simultaneously for a time, cutting into the dealership’s bottom line, according to Shenk.JANUARY PERFORMANCEThe causes of December’s monthly slide continued through January when the dealership lost $6,609 on total revenues of $342,073. In January 2013 the operation earned $42,339 on total revenues of $571,815. Moving was part of the problem, but business also was hurt by bad weather.January in Florida was colder, wetter and windier than normal, and this bad weather continued well into February, Shenk said.Revenues across the board, except for parts, were off as well. Unit sales were down (30 compared to 53 last January), and F&I, accessories and service were off sharply. Parts improved, however, climbing to $34,646 from $30,163.In January 2013 the dealership sold 20 used motorcycles, nearly double the 11 units sold in January of this year. New bike sales were better this January, however, climbing to 11 units from seven last year. Again, bad weather was cited as a major factor.Logged guest traffic was down year-over-year, to 112 people from 132, a drop of about 15 percent. This was a related effect of the move to a new facility, Shenk said.“A lot of people initially went to our old location,” he said. We didn’t make much of an effort to promote the change because we didn’t want to bring in lots of traffic to the new store before we were ready to handle it. That may have been a bit of a mistake in the short run, but I think it will work to our advantage in the long run because we’ve got a lot of happy customers in our new store.”The good news for January, strictly from a numbers point of view, was that total expenses were down $26,013, or nearly 21 percent. Large gains were made in payroll: $38,029, down almost 45 percent from last January. But outside of the numbers, it’s bad news, Shenk said.“Our team is paid on commission, so if payroll is down $20,000, gross profit generated is going to be down a whole lot more than that,” Shenk noted. “That’s not good for the team or the dealership; both need to make money. Lower sales mean lower profits and a lower payroll for our performance-based team. I would like to see payroll double.”Continued'NEED TO STEP UP'Administrative costs at Destination Powersports also dropped sharply, to $14,162 from $21,390, but occupancy costs for the new facility jumped to $21,097 from $12,797.“Occupancy will be higher; just our wind insurance add-on is currently at $4,000 per month. But I expect this to drop a bit in coming months,” Shenk said.One other big difference year-on-year was a non-operating loss of $1,720 posted in January 2014, compared to a gain last January of $8,380, when the dealership recorded profit from some wholesaled trade-in units.This year the non-operating loss pertained to some moving expenses not capitalized, Shenk noted.Finally, inventories were lower this January than last as the dealership cleaned out old product prior to the move. This year, the dealership held 242 units, valued at $2.35 million, down from 277 units last year, valued at $2,47 million.“The team is struggling to get the little maintenance things complete,” Shenk added. “They will need to step up and get it done, or we will make whatever changes necessary to accomplish this.“Here’s the good news,” Shenk added. “We are seeing new faces every day and getting excellent responses fromour visitors.”   EDITOR’S NOTE: The Dealer LAB project is a joint effort between Dealernews and PowerHouse Dealer Services, a consulting firm run by former dealer Bill Shenk, detailing his efforts to return a Florida powersports dealership to profitability.The dealership has several lines, including Yamaha (MC, ATV, UTV and PWC), Kawasaki (MC, ATV, UTV, and PWC), Suzuki (MC and ATV), and Polaris (ATV, UTV and Victory). The financial information in this report is taken from the dealership’s Composite Report supplied by Shenk and is prepared as part of the dealership’s participation in the PowerHouse Dealer 20-Group. The Composite Report is produced from the store’s monthly financial report. In preparing these Dealer Lab reports, Dealernews reviews the dealership’s unaudited P&L statement and Balance Sheet and its Composite Report.http://www.dealernews.com/dealernews/article/dealerlab-bad-weather-new-location-cause-stumble #yashta