June Kerrigan Report: Retail Automotive Bounces Back Strong

July 15, 2020

After some tumultuous activity, the Kerrigan Index settled down for the month of June. The index was up five percent that month, which means a year over year decrease of eight percent. However, most of the lost ground for March is steadily being made up for. Today, Bridget Fitzpatrick and Ryan Kerrigan, Managing Director of Kerrigan Advisors, discuss these and many other key data insights as they present the Kerrigan Advisors Market Update.

According to Ryan, the S&P 500 Index is doing a little better. Year over year, the S&P is down only four percent. This is due in part to the perceived economic sensitivity since vehicles are often a very large purchase for consumers. With that being said, many dealers are reporting strong, even record numbers for May and June. This strong demand for vehicles is actually causing some inventory shortages due to plant closures. Imports are currently set up to deal with this sharp increase in demand, but some of the domestic brands are finding it more difficult.

This means dealers are doubling on used vehicles even going so far as to report 2:1 used to new sales ratios. Now, dealers are making their profits on gross, not volume. Interestingly, the Kerrigan Advisors have not seen a big change in Blue Sky values. While the pandemic certainly ushered in a new set of challenges, it also highlighted how flexible the dealership model really is.

As for valuations, Kerrigan Advisors is categorizing the pandemic as a one-time event. In Ryan’s words, the past few months are not an accurate indicator of where the business is going.

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