KERRIGAN ADVISORS – The Kerrigan Index surpassed 1000 for the first time in its history on Friday, March 5th, continuing a streak of all-time highs throughout late 2020 and the first quarter of 2021. This represents an increase of 238% for the public auto retailers since the March 2020 low, outperforming the S&P 500 by almost 3x.
Although it was not immediately clear what the impacts would be for dealers in March 2020 when the economy was being shut down, the Covid-era created an operating environment ideal for auto retail margins and increased profitability.
Record valuations are bringing the public auto retailers back to the acquisition markets in a significant way. Additionally, auto retail now has a new publicly traded entrant, LMP Automotive (NASDAQ: LMPX), which finalized its first auto dealership transactions on March 5th. The automotive sector has boomed during the pandemic, with auto dealership profitability soaring to all-time highs, resulting from adaptations to the new normal of no-contact transactions which has brought down operating costs as well as increased emphasis on personal transportation, in lieu of ride sharing, public transit and other substitutes for personal mobility.
Ryan Kerrigan, managing director of Kerrigan Advisors, commented, “In addition to a great business model with highly flexibly costs structures, all trends are really supportive of auto retail. Many consumers have left the densest population areas and are in need of personal transportation. Consumers are lining up for cars, trucks and SUVs, as well as parts and service needs. Some of these trends will likely stick as the economy fully reopens and vaccines rollout to most of the country by the summer months. Although it was not immediately clear what the impacts would be for dealers in March 2020 when the economy was being shut down, the Covid-era created an operating environment ideal for auto retail margins and increased profitability.”
Erin Kerrigan, founder & managing director of Kerrigan Advisors, added, “Right-sized inventory levels at auto dealerships have dramatically boosted gross profits and reduced dealerships expenses on floorplan and advertising, creating a more efficient and profitable auto retail model. We expect these impacts to continue well into the future.”